A Study On Sales Incentive Based On Back-up Contrast

With the fierce market competition and information technology development, the differencebetween commodities is smaller and the price war has not the main way to seize the market. Moreand more people are paying attention to the influence of sales effort for demand. Such as cars,computers, cell phones, etc, sales efforts of retailers has great effect on consumers’ buying decisions.Retailers can improve the demand by their sales effort. So suppliers want retailers to take moreeffort. But retailers and supplies have different goals. Retailers will make their decisions only tomaximize their own profit. At this moment, the supply chain is not coordinated.So when the demand is influenced by the sales effort of retailers, how to make a right incentivecontract to improve sales effort, letting the optimal decisions of retailers in Decentralized Systemthe same as the decisions in Integrated System, and coordinating the supply chain become veryimportant.At present, in these papers which are research on back-up contract, the quantity of goods forback-up is all which retailers have not been sold. In this buy-back contract, retailers’risk is reduced,but the risk is transferred to the supplier. So, as the propellent of the supply chain, how to set up theoptimal quantity of back-up, reduce the risk of their own, incentive sales,increase the benefits ofsuppliers ,then realize supply chain coordination of the system are very important.This paper is based on the reality, use these theories: supply chain coordination theory,motivation theory, back-up contract theory and optimization method. This paper research supplychain coordination of a simple supply chain which has one supplier and one retailer; the suppliersupplies the incentive contract; and life cycle of products is the single. In sales begins, the sellermust decide order and sales effort. First, this paper analyzes that the Decentralized System cannotachieve the optimal level, then considering of the risk reduction of the supplier, offer a new back-upcontrast based on the least back-up quantity to make the supply chain achieve coordination. Andthis paper analyzes the feasibility of the contract to let the supplier and retailer have a Paretoimprovement after execute the new contract.Then,the influence of back-up price and the wholesaleprice for supply chain system are analyzed. The paper concludes: to make the supply chaincoordination, the wholesale price and back-up price must be of a linear relationship. Finally, theinfluence of cost sensitive coefficient, the elastic coefficient is analyzed. The back-up contrast basedon the least back-up quantity can coordinate the supply chain, increase profits of the spplier andretailer and receive a win-win situation.Profits of supply chain members can be distribute according to change the parameter of the back-up contrast.