Coordination contracts for outsourcing supply chain with financial constraint

Financial constraint is a great challenge for many firms (especially start-up, small-and medium-sized ones) in reality. This paper investigates the methods for coordinating the call center outsourcing supply chain with financial constraint. Based on an outsourcing supply chain that is composed of a user company and a financially constrained call center, the effectiveness of three contracts (revenue sharing contract, output penalty contract and cost sharing contract) in coordinating the outsourcing supply chain is examined. Theoretical results show that the cost sharing contract can achieve channel coordination as well as improving the profit of each member firm; however, the revenue sharing contract and the output penalty contract achieve channel coordination by sacrificing the profit of the user company. Moreover, financial risk makes the output penalty contract less profitable than the other two contracts under some conditions. Numerical results are further presented to reveal the managerial insights. (C) 2015 Elsevier B.V. All rights reserved.