Quantitiy Commitment Contracts Design And Coordination Mechanism Of A Two-Echelon Supply Chain With Innovative Products

Innovative product has characteristics of short production cycle and high degree of uncertainty, they present a huge challenge to the related enterprises in the supply chain, and it is needed to introduce a new cooperation mechanism to improve the supply chain. So in the light of the characteristics of innovative products, this paper propose a order quantity commitment contract to improve the performance of the supply chain.Firstly, we analyze the effects of order quantity commitment contracts under different wholesale prices, then when the wholesale price is certain, we put a price discount into the order quantity commitment contract, and respectively discuss the influence of different price discounts to the supply chain members’optimal capacity and the expected profit, as a result, we draw some conclusions on the supply chain performance improvements. In addition, we propose a proportion parameter, and based on it, we have a revision by putting a cost of surplus production capability into the supplier’s expected profit function, then further discuss the order quantity how effects the supply chain members’optimal decisions. The proposing of the proportion parameter offers the supply chain members more options and comparisons, because under some certain conditions, it may get a result superior to other commitment contracts, so that it can provide some support to the supply chain members’decision. At last, all our findings are illustrated by numerical examples.Our research provides some new ideas for the innovative products trading between a supplier and buyer, and it plays an important role in reducing inventory and increasing profit.