We study a two-stage supply chain, where the supplier procures a key component to manufacture a product and the retailer orders from the supplier to meet a price-sensitive demand. As the input price is volatile, the two parties enter into either a spot contract, where the retailer orders just before the supplier starts production, or a forward contract, where the retailer determines when to lock a wholesale price. Moreover, we consider three selling-price schemes: Market-Driven, Cost-Plus, and Profit-Max, corresponding to the retailer's minimal, moderate, and maximal pricing power, respectively. We assume that the input price follows a Geometric Brownian motion. To determine the optimal ordering time, we propose an optimization approach that can be viewed as an alternative method to the classic approach by Dixit et al. (1994) and Li and Kouvelis (1999). Our approach leads to deeper analytical results and more transparent ordering policy. Through a numerical experimentation, we compare profitability of the two parties involved under different contracts, pricing schemes, and market conditions. We find that the retailer's ordering policy is determined by a threshold policy based on the current time and input price and that the optimal threshold depends on not only the drift and volatility of the input price, but also their relative magnitude. Our results reveal that the forward contract is a Pareto improvement compared to the spot contract under the Cost-Plus or Profi t-Max pricing, while the supplier may prefer the spot contract over the forward contract under the Market-Driven pricing. Moreover, although having the maximal pricing power is the most favorable condition to the retailer, the supplier does not always benefit from this situation. Furthermore, as the retailer has less pricing power in the market, profitability of both parties is more heavily influenced by the input price volatility
