The Research Of Supply Chain Capacity Coordination Based On Long-term Contract

Supply chain contract is mainly used to solve the conflict of interest problem of supply chain between members. It coordinates the relationship between supply chain members and the distribution of profits through a number of incentives, and make incentralized supply chain profits be equal to centralized supply chain profits, then tap the potential profits of supply chain. Long-term contractual relationship is the trend of global economic integration, therefore more and more enterprises emphasis on business strategic alliances, they share risks, costs of cooperation and benefits of cooperation.The purpose of this paper is to reduce the risk of supplier. We study the model of supply chain cost-sharing and penalty policy with long-term contract. This model is considered perishable goods that can't be stored in any form. The supply chain consists of a manufacturer and a supplier. The manufacturer has realized the demand and how to encourage the supplier to improve its capacity. We know that supplier always lower production capacity in order to reduce risk, while manufacturer often exaggerate demand forecast to meet the ultimate needs. Based on many literatures we study the model of supply chain capacity coordination with long-term contract. The key problem is to enhance supply chain profits by increasing supplier capacity. In particularly, the contributions are as following:First, analysis the basis of research methods of cost-sharing, study how to improve supplier's capacity under the cost-sharing with long-term contract. We improve the model based on Mark and Farzad. We consider two cases with long-term contract: the supplier needs to identify the manufacturer demand and determine the capacity with demand is certain or uncertain. When manufacturer's demand is certain we take into account the proportion of cost-sharing and unite subsides strategies. We prove the strategy can improve supply chain performance; when manufacturer's demand is uncertain we introduce penalty strategy to encourage supplier to create higher capacity. Through the analysis of examples, we can know the impact of the parameters to supply chain profits. Then we compare the profit of supply chain without any strategy and with penalty contract, and prove this strategy can coordinate the supply chain.In addition, this paper also consider supply chain contract model with the situation that manufacturer's demand is certain, the supplier's capacity can't meet manufacturer's demand. Based on Sinha and Sarmah, we consider when the purchase price is certain how to achieve supply chain optimization with long-term contract. The study shows that for a certain purchase price the supply chain profits can increase with supplier's all purchase. Finally, through the numerical example, we compare the supply chain profits with outsourcing or without outsourcing, examples show the purchase external with long-term contract can make the supply chain a higher profit.