Coordination mechanism for the supply chain with leadtime consideration and price-dependent demand
Journal
European Journal of Operational Research
Journal Volume
203
Journal Issue
1
Pages
70-80
Date Issued
2010
Author(s)
Abstract
We study a coordination contract for a supplier-retailer channel producing and selling a fashionable product exhibiting a stochastic price-dependent demand. The product's selling season is short, and the supply chain faces great demand uncertainty. We consider a scenario where the supplier reserves production capacity for the retailer in advance, and permits the retailer to place an order not exceeding the reserved capacity after a demand information update during a leadtime. We formulate a two-stage optimization problem in which the supplier decides the amount of capacity reservation in the first stage, and the retailer determines the order quantity and the retail price after observing the demand information in the second stage. We propose a three-parameter risk and profit sharing contract that coordinates the supply chain. The proposed contract permits any agreed-upon division of the supply-chain profit between the channel members. ? 2009 Elsevier B.V. All rights reserved.
Subjects
Information updating; Leadtime; Newsvendor problem; Price-dependent demand; Return policy; Risk and profit sharing; Supply chain coordination
Other Subjects
Information updating; Leadtime; Newsvendor problem; Price-dependent demand; Return policy; Supply chain coordination; Costs; Profitability; Risk perception; Sales; Supply chain management; Supply chains; Competition
Type
journal article