D E S I G N O F W H O L E S A L E P R I C E A N D R E V E N U E S H A R I N G C O N T R A C T S I N A T W O-E C H E L O N S U P P L Y C H A I N
Author(s):
Abstract:
Supply chain contracts, e.g. revenue sharing contracts, are useful schemes for system coordination. In practice, however, because of different reasons, such as limited information or administrative difficulties, design of coordinating contracts may be hard or impossible. In this situation, the importance of a simple wholesale price contract becomes clearer. Even if a coordinating contract is usable, bargaining on the profit arisen from system coordination would be a challenging subject that requires due consideration. Thus, investigation of wholesale price contract and the bargaining issue between contract partners, in case of the revenue sharing contract, are two features of
this research.
In this research, a two echelon supply chain consisting of a manufacturer and a retailer is considered. The manufacturer is contract designer. The retailer supplies its required material from the manufacturer and prepares final product for a selling season with stochastic demand. In case of a wholesale price contract, the retailer places order to the manufacturer, after receiving its wholesale price. Optimal pricing and ordering decisions, in case of the wholesale price contract, is investigated. Nevertheless this contract is not a coordinating contract, however it is important from practical dimensions. Therefore, as theorem one, a specific relation for the optimal wholesale price
is presented. In this theorem it is assumed that demand has increasing generalized failure rate (IGFR). Usual demand distributions such as normal, uniform and gamma, has this feature.
In the following, the design of the revenue sharing contract is investigated. According to this contract the manufacturer reduces its wholesale price in return of receiving a portion of the retailer's sales profit. Considering a bargaining power for each member, as theorem two, the parameters of revenue sharing contract in Nash equilibrium are determined.
Finally, with the numerical analysis, optimal decisions and expected profit of contract partners, in cases of wholesale price and revenue sharing contracts, are analyzed. According to the results, if the changes in a system are towards improvement of situation, e.g. increase of price or decrease of costs, implementation of a coordinating contract will be more profitable compared to the wholesale price contract.
this research.
In this research, a two echelon supply chain consisting of a manufacturer and a retailer is considered. The manufacturer is contract designer. The retailer supplies its required material from the manufacturer and prepares final product for a selling season with stochastic demand. In case of a wholesale price contract, the retailer places order to the manufacturer, after receiving its wholesale price. Optimal pricing and ordering decisions, in case of the wholesale price contract, is investigated. Nevertheless this contract is not a coordinating contract, however it is important from practical dimensions. Therefore, as theorem one, a specific relation for the optimal wholesale price
is presented. In this theorem it is assumed that demand has increasing generalized failure rate (IGFR). Usual demand distributions such as normal, uniform and gamma, has this feature.
In the following, the design of the revenue sharing contract is investigated. According to this contract the manufacturer reduces its wholesale price in return of receiving a portion of the retailer's sales profit. Considering a bargaining power for each member, as theorem two, the parameters of revenue sharing contract in Nash equilibrium are determined.
Finally, with the numerical analysis, optimal decisions and expected profit of contract partners, in cases of wholesale price and revenue sharing contracts, are analyzed. According to the results, if the changes in a system are towards improvement of situation, e.g. increase of price or decrease of costs, implementation of a coordinating contract will be more profitable compared to the wholesale price contract.
Keywords:
Language:
Persian
Published:
Industrial Engineering & Management Sharif, Volume:33 Issue: 1, 2017
Pages:
13 to 22
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