11. Coordinating the Supply Chain Using Service-Level and Profit-Sharing Contracts

—Xun Xu, California State University, Stanislaus

Abstract

We discuss the coordination mechanism in a three-level supply chain that includes one supplier, one distributor, and two retailers, using both a service-level contract and a profit-sharing contract. Via numerical studies, we find that both the individual service-level contract and profit-sharing contract can achieve more profits for the whole supply chain. The profits can be further enhanced if both contracts are used simultaneously. The incentive of stakeholders to use a profit-sharing contract depends on various service levels. Our findings help stakeholders in the supply chain use centralized decision ...

Get The Best Thinking in Business Analytics from the Decision Sciences Institute now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.