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Abstract
This paper considers a two-echelon supply chain system consisting of one manufacturer and one retailer for deteriorating items. Shortages are not allowed and the market demand is simultaneously influenced by multiple factors including promotional effort, selling price, on-hand inventory level and time. Demand information is symmetrically known to both the manufacturer and the retailer, hence, the promotional effort is assumed to be provided by both members. For the system where the manufacturer and the retailer share the investment cost of promotional effort equally, it is shown that revenue sharing contract and revenue and cost sharing contract can both lead to perfect coordination. Comparing these two contracts, it is also found that the latter contract is easier to be accepted by the system. Hence, revenue and cost sharing contract is applied to coordinate the general system, and the range of revenue sharing fraction leading to a win-win outcome is obtained. Two numerical examples are presented to illustrate the development of the model with sensitivity analysis.
Acknowledgements
The authors would like to thank the associate editor and the two anonymous reviewers for their constructive comments that have significantly improved the quality of the paper.
Disclosure statement
No potential conflict of interest was reported by the authors.
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Notes on contributors
Qing-Guo Bai
Qing-Guo Bai is currently a PhD student in the School of Management, Huazhong University of Science and Technology, P.R. China. His research interests include inventory control, supply chain management, etc. He has published papers in several journals, including Journal of Industrial and Management Optimization, Journal of Systems Science and Complexity, International Journal of Automation and Computing, and Journal of Applied Mathematics and Computing.
Xian-Hao Xu
Xian-Hao Xu is currently a professor in the School of Management, Huazhong University of Science and Technology, P.R. China. He received his PhD degree in management science from Huazhong University of Science and Technology in 2005. His research interests include warehouse management, supply chain and logistics management, supply chain finance, etc. He has published papers in several journals, including International Journal of Production Research, International Journal of Systems Science, Journal of Intelligent Manufacturing, Journal of Management Sciences in China, etc.
Ming-Yuan Chen
Ming-Yuan Chen is currently a professor in the Department of Mechanical and Industrial Engineering, Concordia University, Canada. He received his PhD degree in industrial engineering from University of Manitoba, Canada in 1991. His research interests include manufacturing system analysis, production and inventory planning, supply chain management, transportation system analysis, combinatorial optimisation, etc. He has published more than 100 papers in many international journals, including Transportation Science, Transportation Research Part B: Methodological, European Journal of Operational Research, Computer & Operations Research, International Journal of Production Economics, Expert Systems with Applications, Computers & Industrial Engineering, Journal of the Operational Research Society, International Journal of Production research, International Journal of Advanced Manufacturing Technology, etc.
Qian Luo
Qian Luo is currently a graduate student in the School of Management, Huazhong University of Science and Technology, P.R. China. His research interests include supply chain management and operations management.