Study On Coordination Of A Dual Channel Supply Chain Based On Option Contracts Under Uncertain Demand

With the rapid development of the Internet,many manufacturers that only sell products through traditional retailers have begu n to open up online channels.Therefore,the future will be the development stage of the dual channel distribution model.The dual channel supply chain includes retail channels and direct channels,which attract s consumers with different preferences and can meet more market demand.However,suppliers and retailers in the dual channel supply chain are not only upstream and downstream supply relations,but also peer-to-peer competitions.The simultaneous existence o f channel conflict and double marginalization makes the coordination more complicated.Therefore,the coordination problem in the dual channel supply chain is the focus of this paper.This article first builds a dual channel supply chain that includes a supplier and a retailer.The supplier sells products through retail channel and direct channel.Assuming that the sales prices of the two channels are identical and the uncertain market demand depends on the retail price.To reduce the risk of the uncertain demand,the supplier offers an option contract to encourage the retailer to increase order quantities.In order to compensate for the losses suffered by the supplier,a revenue sharing contract is further introduced that the retailer shares part of retail channel revenues with the supplier,making it more flexible of the profit distribution among members of the supply chain.Results show that in the option contract,the dual channel supply chain coordination can be achieved by setting the appropriate optio n price and execution price,but the numerical simulation results show that the supplier’s profit is impaired,so the supplier and the retailer cannot achieve a win-win situation.To compensate for the loss es of the supplier,the revenue sharing contract is introduced that the supplier can get a fraction of revenue of the retail channel.The dual channel supply chain is coordinated by setting the appropriate option price,execution price and revenue sharing ratio.The numerical simulation results show tha t when the revenue sharing ratio is within a certain range,the supplier and the retailer can achieve perfect winwin coordination.