Research On Contract Under VMI With Promotion Effects And Random Yield

Vendor Managed Inventory (VMI) is a new integrated supply chain management strategy. It allowed the supplier to manage the retailer's inventory and decide the replenishment. Because of the shift of the inventory control, it lacks of the unification of right and responsibility. The implementation process required contract to coordinate supplier and retailer, which urges them to build a strategic partnership with each other in a fair, collaborative and interactive way, and so that it can optimize the overall supply chain revenue.Recent years, scholars have done much research on contract in VMI supply chain. The study mostly considered stochastic demand or that the market demand is related to product price. The study on contract which considered random yield and promotion effort effects on demand is rare. Therefore, this paper, which based on the analysis and summarization of existing research at home and abroad, has done the specific research:Firstly we analyzed the optimal promotional effort and supply quantity of the centralized-control mode and VMI mode without contract in a single-period two-stage supply chain facing stochastic effort dependent demand. Then, a sales rebate contract model with retailer's paying the supplier a surplus subsidy for the products which are not sold out was established in VMI. The conditions whether the retailer pays the surplus subsidy to take part in the sales rebate contract are also analyzed and it showed that the contract can improve the supply chain revenue. Furthermore, the contract was modified and it was possible to realize the optimal revenue in supply chain.Secondly, in the supply chain of VMI model which was characterized by random yield and stochastic promotion effort dependent demand, the decision-making of the supplier and retailer under centralized-control and decentralized-control were analyzed, the affection of the random yield to the potential cost and decision-making of supplier was discussed, the contract model combined sales rebate and buy-back was built. On this basis, the affection of contract to retailer and supplier's decision-making and the revenue of the whole supply chain were analyzed. The research showed that the contract can urge retailer to increase the promotion effort and order quantity, which can also urge supplier to increase the planned production quantity, and this can improve the revenue of the supply chain. Furthermore, the way to realize the best income of the supply chain was proposed. The results showed that appropriate sales rebate would improve the performance of VMI supply chain. Our study enriched the field of research on coordination in VMI supply chain, and provided theoretical support to managers of enterprise.