Study on Coordination of Supply Chain with Combined Contracts

This paper investigates coordination of supply chain consisting of one manufacturer and one retailer facing consumer return and stochastic demand that is sensitive to both sales effort and retail price. When demand is influenced by both retail price and retail sales effort, coordination is challenging traditional contracts can coordinate the supply chain. To resolve this issue, we study a variety of combined contract types including: buyback contract, joint buyback with sales rebate and penalty (SRP) and buyback with revenue sharing, buy back with sales rebate and buyback with quantity discount. We find that only the properly designed buyback with SRP contract and buyback with quantity discount contract are able to achieve channel coordination and lead to a Pareto improving win-win situation for supply members.