Supply chain coordination mechanisms under flexible contracts

Abstract

In supply chain management, an important research direction is to coordinate the supply chain through introducing flexible contracts. A supply chain contract is flexible if it can satisfy two conditions at the same time: the supply chain is coordinated, and the total profit of the supply chain can be arbitrarily divided between the supply chain members. This paper puts out two contracts, a flexible return contract and a flexible wholesale price discount contract. In contrast to many of literature, the supply chain contracts with an endogenous wholesale price is specifically considered, and a detailed sensitivity analysis of the contract parameters is given. The paper also discusses the application of the contract in vendor-managed inventory (VMI) mode. The results show that the supply chain's performance is improved after introducing above contracts. All the findings are illustrated by numerical examples.