Channel coordination through a revenue sharing contract in a two-period newsboy problem

This paper studies channel coordination through revenue sharing contract between a single retailer and a single wholesaler in a two-period newsboy problem. Two models are discussed, a single-buying-opportunity model and a two-buying-opportunity model. We discuss how the revenue sharing ratio and the wholesale prices are to be determined in order to achieve channel coordination and a win–win outcome. We find that the wholesale prices are set to be lower than the retail prices and the optimal revenue sharing ratio is linearly increasing in the wholesale prices. The proposed revenue sharing contract has more flexibility than price protection, in that the optimal revenue sharing ratio can be settled reasonably through negotiation between the retailer and wholesaler.     

An integrated revenue sharing and quantity discounts contract for coordinating a supply chain dealing with short life-cycle products

This paper develops a combined contract model for coordinating a two stage supply chain where the demand at the retailer’s end is price sensitive and stock dependent. It has been shown that proposed coordination mechanism achieves perfect coordination and win–win situation for both the members of the supply chain. Further, an extensive sensitivity analysis is performed to examine the impact of various parameters on supply chain performance. It has been found that stock dependency factor has positive impact on order quantity and subsequently on supply chain performance. The paper has also made a comparative statics analysis to see the impact of certain parameters on the pricing and replenishment policies of the retailer.     

A new revenue sharing mechanism for coordinating multi-echelon supply chains

A new type of revenue sharing (RS) contract mechanism for multi-echelon supply chains between the most downstream entity and all upstream entities is proposed. The new RS contract is analyzed in the linear supply chain setting facing stochastic demand. Advantages over mechanisms with RS contracts between all pairs of adjacent entities are discussed and demonstrated.     

A note on channel performance under consignment contract with revenue sharing

Wang et al. [Y. Wang, L. Jiang, Z.J. Shen, Channel performance under consignment contract with revenue sharing. Management Science 50 (2004), 34–47] indicate that a decentralized supply chain cannot be perfectly coordinated. This note provides a cooperative game model that implements profit sharing between the manufacturer and the retailer to achieve their cooperation. When the manufacturer and the retailer are assumed to be risk-neutral, under a very mild restriction on the demand distribution function, the cooperative game model can achieve its unique equilibrium solution in iso-price-elastic or linear demand case. Under the revenue sharing agreement attached with the equilibrium payment scheme, the decentralized supply chain can be perfectly coordinated.     

Towards integration: a revenue-sharing contract in a supply chain

Email: zhaoqiong.qin{at}erau.edu Received on 31 May 2006. Accepted on 11 December 2006. This paper deals with the problem of a revenue-sharing contractadopted in a supply chain involving one supplier and one retailerwith short life-cycle products. Under this contract, the retailercan obtain the product from the supplier at a discounted pricewhile as a compensation, the retailer must share his revenuewith the supplier at a certain revenue-sharing rate, say r (0 r 1), where r represents the portion of the revenue to bekept by the retailer. We use a two-stage (Stackelberg) gameto model the problem, where one player is the game's leaderand the other the game's follower. Our ultimate objective isto maximize the overall supply chain's total profit, and toshow the effects of salvage revenue and the revenue-sharingrate on transfer cost rate, profit of the supplier and retailerand the overall supply chain's total profit while upholdingthe individual components’ incentives. Our analysis exhibitsthat the case in which salvage revenue is not shared is preferredand the computational results to explore the effects of therevenue-sharing rate lead to many managerial insights regardingthe leader of the game.     

Reverse channel decisions for a fuzzy closed-loop supply chain

This article reports the results of a study that explores the decisions of reverse channel choice in a fuzzy closed-loop supply chain. Specifically, a manufacturer produces new products by using original components or by remanufacturing used products and wholesales the new products to the retailer who then sells them to the consumers. The used products are collected by the manufacturer or the retailer or a third party. The primary goal of this paper is to investigate the implications of three different used-product collection modes on the decisions of the manufacturer, the retailer, and the third party, and on their own profits in the expected value model. By using game theory and fuzzy theory, the firms optimal strategies are obtained.     

Supply chain coordination by manufacturer reward contract

We investigate how a manufacturer sets a reward contract to realize supply chain coordination when a retailer's service effort has a showrooming effect. We demonstrate that the manufacturer's reward contract increases retail prices and benefits the retailer but may hurt the manufacturer. Meanwhile, a large unit reward can soften the price competition. We also find that when the unit reward is high, a greater showrooming effect may benefit supply chain members, and the retailer provides a higher service effort.     

Quality uncertainty and quality-compensation contract for supply chain coordination

Many firms often face quality problems, even though quality improvement has long been a competitive imperative for performance enhancement. When suppliers are the sources of quality problems, prior literature has focused on sustaining a buyer’s competitiveness given the suppliers’ quality uncertainty. Surprisingly, the literature has not paid sufficient attention to quality uncertainty from a coordination perspective. On the other hand, the literature on channel coordination has not considered quality uncertainty in designing a contract of alliance. We bridge the gap between these two streams of literature by explicitly considering quality uncertainty in a coordination framework. In contrast to the coordination literature, we show that channel integration may result in smaller order quantity and less accurate inspection than in a decentralized supply chain if product quality is uncertain. We examine the two most extensively discussed contracts for coordination, buybacks and revenue-sharing, in the presence of quality uncertainty, and find that these two contracts fail to coordinate the supply chain. We then propose a new scheme, the quality-compensation contract, in which the manufacturer compensates the retailer for defective products that are inadvertently sold to consumers, and analytically show that the contract fully coordinates the supply chain.     

A genetic algorithm approach for solving a closed loop supply chain model: A case of battery recycling

Due to the implementation of government legislation, social responsibility, environmental concern, economic benefits and customer awareness the industries are under a great pressure not only to provide environmentally friendly products but also to take back the product after its use. The issue in reverse logistics is to take back the used products, either under warranty or at the end of use or at the end of lease, so that the products or its parts are appropriately disposed, recycled, reused or remanufactured. In order to overcome this issue, it is necessary to setup a logistics network for arising goods flow from end users to manufacturers. In this study, the optimum usage of secondary lead recovered from the spent lead–acid batteries for producing new battery is presented. The disposal in surface or sewage water or land of liquid content of the lead–acid batteries is strictly restricted. Because of the need for environmental protection and the lack of considerable lead resources, the spent batteries treatment and lead recovery are becoming crucial now-a-days. The objective of this paper is to develop a multi echelon, multi period, multi product closed loop supply chain network model for product returns and the decisions are made regarding material procurement, production, distribution, recycling and disposal. The proposed heuristics based genetic algorithm (GA) is applied as a solution methodology to solve mixed integer linear programming model (MILP). Finally the computational results obtained through GA are compared with the solutions obtained by GAMS optimization software. The solution reveals that the proposed methodology performs very well in terms of both quality of solutions obtained and computational time.     

基于最优让步均衡协调策略的供应链差价补偿机制研究

制造商为了激励零售商订购更多数量的产品,会在产品零售价下调时提供给零售商一定的补偿,如何制定最优补偿机制是提高供应链收益的关键问题.为此,建立了两阶段销售差价补偿机制下制造商与零售商的博弈模型,分析了纳什均衡解和Stackelberg均衡解下制造商对零售商的差价补偿机制的决策行为,导出了在最优让步均衡策略下差价补偿机制...     

Revenue management for a supply chain with two streams of customers

In this paper, we consider revenue management for a service supply chain with one supplier and one retailer. The supplier has a limited capacity of a perishable product and both the supplier and the retailer face customers. Each customer may choose to buy a product from either the supplier or the retailer by considering prices and the cost associated with switching. For the centralized model, the supplier determines the selling prices for both herself and the retailer, and the retailer simply collects a commission fee for each product sold. We derive monotone properties for the revenue functions and pricing strategies. Further, we show that the commission fee increases the retailer’s price while decreasing the supplier’s and leads to efficiency loss of the chain. For the decentralized decision-making model, the supplier and the retailer compete in price over time. Two models are considered. In the first, the retailer buys products from the supplier before the selling season and in the second the retailer shares products with the supplier in retailing. For both models, we discuss the existence of the equilibrium and characterize the optimal decisions. Numerical results are presented to illustrate properties of the models and to compare the supply chain performance between the centralized and the decentralized models.     

Internal supply chain coordination in the electric utility industry

Electric utilities have a well-established vertical internal and external supply chain. Theoretically, information sharing, involving production, inventory, and other policy variables, between chain entities can improve supply chain performance. Such sharing relies on a systematic determination of the optimal policy variables for the chain. This paper presents an analysis of the electric utility’s decision problem based on an optimal control model in a competitive market environment. Optimal production and inventory policies are developed for a centralized supply chain under full information sharing. The model and policies are tested with electric utility industry data, and performance implications are discussed for electric utility managers and public regulators.     

Double marginalization and coordination in the supply chain with uncertain supply

This paper explores a generalized supply chain model subject to supply uncertainty after the supplier chooses the production input level. Decentralized systems under wholesale price contracts are investigated, with double marginalization effects shown to lead to supply insufficiencies, in the cases of both deterministic and random demands. We then design coordination contracts for each case and find that an accept-all type of contract is required to coordinate the supply chain with random demand, which is a much more complicated situation than that with deterministic demand. Examples are provided to illustrate the application of our findings to specific industrial domains. Moreover, our coordination mechanisms are shown to be applicable to the multi-supplier situation, which fills the research gap on assembly system coordination with random yield and random demand under a voluntary compliance regime.     

A robust optimization approach to closed-loop supply chain network design under uncertainty

The concern about significant changes in the business environment (such as customer demands and transportation costs) has spurred an interest in designing scalable and robust supply chains. This paper proposes a robust optimization model for handling the inherent uncertainty of input data in a closed-loop supply chain network design problem. First, a deterministic mixed-integer linear programming model is developed for designing a closed-loop supply chain network. Then, the robust counterpart of the proposed mixed-integer linear programming model is presented by using the recent extensions in robust optimization theory. Finally, to assess the robustness of the solutions obtained by the novel robust optimization model, they are compared to those generated by the deterministic mixed-integer linear programming model in a number of realizations under different test problems.     

Contract design and supply chain coordination in the electricity industry

In this article we propose a model of the supply chain in electricity markets with multiple generators and retailers and considering several market structures. We analyze how market design interacts with the different types of contract and market structure to affect the coordination between the different firms and the performance of the supply chain as a whole. We compare the implications on supply chain coordination and on the players’ profitability of two different market structures: a pool based market vs. bilateral contracts, taking into consideration the relationship between futures and spot markets. Furthermore, we analyze the use of contracts for differences and two-part-tariffs as tools for supply chain coordination. We have concluded that there are multiple equilibria in the supply chain contracts and structure and that the two-part tariff is the best contract to reduce double marginalization and increase efficiency in the management of the supply chain.     

A rewarding-punishing coordination mechanism based on Trust in a divergent supply chain

Coordination of decentralized supply chains using contract design is a problem that has been widely addressed in the literature. We consider a divergent supply chain including a supplier and several retailers producing fashion products with short sale seasons. The retailers cooperate with the supplier as sales agents; i.e., they work in the framework of revenue sharing contracts. Because of their proximity to the market, retailers can provide more accurate demand forecasts to the supplier that is used to decide on issues such as capacity building and market prices with regard to retailers stiff due dates, different lead times and different price-dependent demand functions. To ensure abundant supply and cope with the demand variability, the retailers have an incentive to exaggerate their private forecast information. In this study, we propose a new rewarding-punishing coordination mechanism based on trust between supply chain tiers, considered as a differentiation factor between honest and deceptive partners. An optimization model is developed as a building block of this mechanism. An approximation method is used to simplify and solve the problem. The model is then implemented using Monte-Carlo simulation in four different situations, according to 10 different strategies for forecast information sharing. The findings from the tests show that the mechanism including trust as a decisional factor performs better than ‘No Trust’ mechanism in all situations. These results suggest that taking into account Trust in designing coordination mechanism may have significant influence on the financial performance of the supply chain.     

Single-supplier/multiple-buyer supply chain coordination: Incorporating buyers’ expectations under vertical information sharing

We address the coordination problem in a single-supplier/multiple-buyer supply chain. The supplier wishes to coordinate the supply chain by offering quantity discounts. To obtain their complete cost information, the supplier exchanges his own cost parameters with buyers leading to vertical information sharing. The supplier thinks that the buyers, as they have access to supplier’s setup and holding cost information, may demand a portion of the anticipated coordination savings based on the partial information they hold about the cost structure of the entire supply chain. We model each buyer’s expectations based on her limited view of the entire supply chain which consists of herself and the supplier only. These expectations are then incorporated into the modeling of the supply chain, which results in a generalization of the traditional Stackelberg type models. We discuss alternative efficiency sharing mechanisms, and propose methods to design the associated discount schemes that take buyers’ expectations into account. In designing the discount schemes, we consider both price discriminatory and non-price discriminatory approaches. The study adds to the existing body of work by incorporating buyers’ expectations into a constrained Stackelberg structure, and by achieving coordination without forcing buyers to explicitly comply with the supplier’s replenishment period in choosing their order quantities. The numerical analysis of the coordination efficiency and allocation of the net savings of the proposed discount schemes shows that the supplier is still able to coordinate the supply chain with high efficiency levels, and retain a significant portion of the net savings.     

The effect of information sharing on supply chain stability and the bullwhip effect

This paper analyzes the bullwhip effect in multi-stage supply chains operated with linear and time-invariant inventory management policies and shared supply chain information. Such information includes past order sequences and inventory records at all supplier stages. The paper characterizes the stream of orders placed at any stage of the chain when the customer demand process is known and ergodic, and gives an exact formula for the variance of the orders placed. The paper also derives robust analytical conditions, based only on inventory management policies, to predict the presence of the bullwhip effect and bound its magnitude. These results hold independently of the customer demand. The general framework proposed in this paper allows for any inventory replenishment policies, any ways of sharing and utilizing information, and any customer demand processes. It is also shown as a special case that sharing customer demand information across the chain significantly reduces, but does not completely eliminate, the bullwhip effect.     

Who benefit from agency model: A strategic analysis of pricing models in distribution channels of physical books and e-books

We model a supply chain consisting of an author, a publisher, a physical bookstore (p-bookstore), and an electronic bookstore (e-bookstore). We employ game theory to examine and compare two types of pricing models of electronic books (e-books): wholesale model and agency model. Furthermore, we consider decentralized and horizontally centralized channels. The p-bookstore and e-bookstore are independent in the former but centralized in the latter. We adopt a simplified linear demand model to study when the publisher and the e-bookstore both benefit from the agency model. We find that a Pareto zone where both the publisher and e-bookstore benefit from the agency model always exists in the decentralized channels. In the agency model, the benefit from e-book sales may be more than the loss in physical book (p-book) sales. By contrast, a Pareto zone exists in the horizontally centralized channels if the wholesale price of p-books is not excessively low and the price elasticity is not extremely large. To check the robustness of our results, we relax model assumptions and conduct numerical studies in the Pareto zone to investigate how various parameters, such as authors royalty rate, affect profit improvement and readers welfare. We show that the publisher and bookstore have great potentials for profit improvement in the Pareto zone. Significant improvement is also observed in readers welfare.     

Dynamic dairy facility location and supply chain planning under traffic congestion and demand uncertainty: A case study of Tehran

In this paper, dynamic dairy facility location and supply chain planning are studied through minimizing the costs of facility location, traffic congestion and transportation of raw/processed milk and dairy products under demand uncertainty. The proposed model dynamically incorporates possible changes in transportation network, facility investment costs, monetary value of time and changes in production process. In addition, the time variation and the demand uncertainty for dairy products in each period of the planning horizon is taken into account to determine the optimal facility location and the optimal production volumes. Computational results are presented for the model on a number of test problems. Also, an empirical case study is conducted in order to investigate the dynamic effects of traffic congestion and demand uncertainty on facility location design and total system costs.