Revenue Sharing in a Two-Stage Supply Chain with Linear Stepwise Unit Inventory Holding Cost

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Author(s): Jing Hou (Southeast University, P. R. China), Amy Z. Zeng (Worcester Polytechnic Institute, USA)and Lindu Zhao (Southeast University, P. R. China)
Copyright: 2011
Pages: 21
Source title: Supply Chain Optimization, Management and Integration: Emerging Applications
Source Author(s)/Editor(s): John Wang (Montclair State University, USA)
DOI: 10.4018/978-1-60960-135-5.ch018

Keywords: Business & Management / Business Science Reference / Operations and Service Management / Supply Chain Management

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Abstract

In this chapter we focus on examining the coordination mechanisms for a two-stage supply chain comprising one supplier and one retailer. We consider such a channel relationship that the transaction quantity between the two members is sensitive to the supplier’s inventory level and that the supplier’s unit inventory holding cost has a linear stepwise structure. We devise a coordinated revenue-sharing contract with bargaining so that each party’s respective profit is better than that resulted from the simple sequential optimization mechanism. The key contract parameters, namely the supplier’s inventory level and the retailer’s revenue-sharing fraction, are obtained and analyzed. Numerical illustrations of the contracts are given and shed lights on how the supply chain should coordinate in order to gain better performance.

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Revenue Sharing in a Two-Stage Supply Chain with Linear Stepwise Unit Inventory Holding Cost

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