Revenue Sharing Contract In Multiple Period Supply Chain

Nowadays people of management field become more and more interested in the study of supply chain contract. Supply chain contract can ensure the coordination of the bargainers and optimize the performance of channel through providing appropriate information and incentive measures. Pasternack first proposed the concept of supply chain contract and proposed the optimal pricing and return policies for perishable commodities.Supply chain involves the existence of several decision makers pursuing different objectives, possibly conflicting among each other. In fact, a behavior that is locally rational could be globally inefficient. Coordination mechanisms are then necessary so as to have local decision makers pursue channel coordination.The design of supply chain contract is mostly to solve two problems that affect the efficiency of the entire supply chain. The first is double marginalization resulted in pursuing the best profits of the supply chain numbers. The second is bullwhip effect resulted in information asymmetry. Revenue sharing contract is one of the efficiency means to solve above problems. In revenue sharing contract, the supplier receives the retailer a lower wholesale price and in exchange for a part of revenue of retailer.Based on the research in the wholesale price contacts, we pursuit to explore conditions that may lead the revenue sharing contract with the newsvendor problem to achieve perfect channel coordination for the additive fashion and multiplicative fashion in the two and three stage supply chain, respectively. A properly designed revenue contract that coordinates the system and supports an arbitrary division of supply chain profit is set up. Our contributions are as follow:1 We study the wholesale price contacts. This model allows the retailer and the distributor to maximize their profits, however, contrary to popular belief (based on the wholesale price contacts in a buyer-supplier system) we show that the manufacturer does not always find a joint optimal sales quantity to achieve"double marginalization", especially, when we assign the bargaining power to other supply chain members, a joint optimal sales quantity is difficult to be found. It has proven that the demand distribution characteristics and the structure of supply chain are the critical parameters for the manufacturer to maximize profit.2 We combine the revenue sharing contract and the joint selling price and stocking level decision of the newsvendor model. Our interest is to explore conditions that may lead the revenue sharing contract with the newsvendor problem to achieve perfect channel coordination for the additive fashion and multiplicative fashion, respectively. The results indicate that the revenue sharing contract with the newsvendor problem cannot achieve perfect channel coordination. It has proven that the per-unit penalty cost of under-stocking and per-unit salvage cost of over-stocking are the critical external parameters for supply chain to achieve perfect channel coordination. A numerical example is presented to confirm the above conclusion.3 We propose a model of an supply chain contract aimed at coordinating a three-stage supply chain, which is based on the revenue sharing mechanism and demand with price sensitivity. This model allows the supply chain efficiency to be achieved as well as it could improve the profits of all the supply members, by turning the contract parameters(φA,φB)and price p. A numerical example is presented to confirm the above conclusion.