Coordinating a Supply Chain Under Vendor Managed Inventory with Sales Effort Effects

This paper investigates the issues of channel coordination for a supply chain under vendor managed inventory (VMI) facing stochastic demand that is sensitive to sales effort. In the standard newsvendor setting one of the vendor or the retailer designs the contract to incentive, and coordinates the supply chain. In this paper, both the vendor and the retailer design the contract together, and both the vendor and the retailer should be incentived to behave as well as the integrated one. But none of the traditional contracts can coordinate the supply chain under VMI with sales effort effects. So we explore a contract including revenue-sharing policy and improved sales rebates and penalty (SRP) contract, which can coordinate this supply chain. At last, we use a numerical example to illustrate the findings and gain more insights.