512 / 2024-04-25 17:51:03

Enhancing Supply Chain Coordination: A Novel Contract Mechanism for Long Selling Seasons

supply chain coordination, base stock policy, contract mechanism

For products with a long selling season, we consider a supply chain that includes a supplier and retailer. If the retailer determines the order quantity based on demand, the supplier faces uncertainty in downstream demands, posing challenges in planning production and potentially increasing overall supply chain costs. To foster coordination of supply chain, we propose a unique supply chain contract mechanism: prior to the start of the selling season, supplier and retailer jointly determine the total order quantity for the entire duration. Subsequently, retailers adjust order quantities in each cycle based on market demand. If cumulative orders exceed the agreed-upon total, the excess is not supplied. Conversely, if cumulative orders fall short at season's end, the retailer is obliged to purchase the remaining products as per the contract. Our study demonstrates that, within the context of long selling seasons, the cost incurred by adopting this specialized supply chain contract approximates the optimal cost with a difference that tends towards . This underscores the potential benefits of this contractual mechanism in bolstering supply chain coordination and cost management.