Overview and classification of coordination contracts within forward and reverse supply chains

Among coordination mechanisms, contracts are valuable tools used in both theory and practice to coordinate various supply chains. The focus of this paper is to present an overview of contracts and a classification of coordination contracts and contracting literature in the form of classification schemes. The two criteria used for contract classification, as resulted from contracting literature, are transfer payment contractual incentives and inventory risk sharing. The overview classification of the existing literature has as criteria the level of detail used in designing the coordination models with applicability on the forward and reverse supply chains.Coordination contracts; forward supply chain; reverse supply chain

Mixed contracts for the newsvendor problem with real options

In this paper we consider the newsvendor model with real options. We consider a mixed contract where the retailer can order a combination of q units subject to the conditions in a classical newsvendor contract and Q real options on the same items. We provide a closed form solution to this mixed contract when the demand is discrete and study some of its properties. We also offer an explicit solution for the continuous case. In particular we demonstrate that a mixed contract may be superior to a real option contract when a manufacturer has a bound on how much variance she is willing to accept.Newsvendor model; real options; discrete demand; mixed contract

Buyback and return policies for a book publishing firm = Egy könyvkiadó vállalat visszavásárlási stratégiája

A dolgozat célja egy vállalati gyakorlatból származó eset elemzése. Egy könyvkiadót tekintünk. A kiadó kapcsolatban van kis- és nagykereskedőkkel, valamint a fogyasztók egy csoportjával is vannak kapcsolatai. A könyvkiadók projekt rendszerben működnek. A kiadó azzal a problémával szembesül, hogy hogyan ossza el egy frissen kiadott és nyomtatott könyv példányszámait a kis- és nagykereskedők között, valamint mekkora példányszámot tároljon maga a fogyasztók közvetlen kielégítésére. A kiadóról feltételezzük, hogy visszavásárlási szerződése van a kereskedőkkel. A könyv iránti kereslet nem ismert, de becsülhető. A kis- és nagykereskedők maximalizálják a nyereségüket. = The aim of the paper is to analyze a practical real world problem. A publishing house is given. The publishing firm has contacts to a number of wholesaler / retailer enterprises and direct contact to customers to satisfy the market demand. The book publishers work in a project industry. The publisher faces with the problem how to allocate the stocks of a given, newly published book to the wholesaler and retailer, and to hold some copies to satisfy the customers direct from the publisher. The publisher has a buyback option. The distribution of the demand is unknown, but it can be estimated. The wholesaler / retailer maximize the profits. The problem can be modeled as a one-warehouse and N-retailer supply chain with not identical demand distribution. The model can be transformed in a game theory problem. It is assumed that the demand distribution follows a Poisson distribution

Experimental Investigation of Supplier-Retailer Contracts: The Wholesale Price Contract

We examine decision making in a simple supplier-retailer wholesale price contract in the experimental economics laboratory. We observe wholesale prices and order quantities below the game-theoretical predictions. The supply chain’s efficiency is as predicted but profits are more equitably allocated. Cette étude en économie expérimentale examine les contrats de prix en gros négociés entre un détaillant et un vendeur. Nous observons que les prix et les quantités négociés sont en dessous des prévisions tirées du modèle retenue en théorie des jeux. Les résultats expérimentaux indiquent que l’efficacité de la chaîne d’approvisionnement est inférieur à 100 % tel que prédit par le modèle. Par ailleurs, les profits sont alloués de façon plus équitable que l’allocation prédite par le modèle.supply chain coordination, industrial organization, experimental economics, coordination dans la chaîne d’approvisionnement, organisation industrielle, économie expérimentale

A review of non-cooperative newsvendor games with horizontal inventory interactions

There are numerous applications of game theory in the analysis of supply chains where multiple actors interact with each other in order to reach their own objectives. In this paper we review the use of non-cooperative game theory in inventory management within the newsvendor framework describing a single period inventory control model with the focus on horizontal interactions among multiple independent newsvendors. We develop a framework for identifying these types of horizontal interactions including, for example, the models with the possibility of inventory sharing via transshipments, and situations with substitutable products sold by multiple newsvendors. Based on this framework, we discuss and relate the results of prior research and identify future research opportunities

Improving supply chain efficiency through wholesale price renegotiation

In a decentralized supply chain, double marginalization is an important source of inefficiency. We suggest in this paper a simple mechanism to reduce it that uses a wholesale price contract and renegotiation. Our mechanism only requires repeated interaction, and rational behavior from the players. Specifically, over T rounds of negotiation, the supplier proposes different prices in each round, and the buyer places orders at the quoted price. Even though prices are decreasing in time, the buyer places a positive order, to force the supplier to reduce its price in the following round. This interaction results in higher profits for both supplier and buyer. We solve the buyer and supplier problems and show that, as T increases, supply chain efficiency tends to 100%, and the sub-optimality gap decreases with 1/T. Finally, we discuss how these results can be applied to design negotiation processes.strategic customer; dynamic pricing; supply chain;

Penalty and reward contracts between a manufacturer and its logistics service provider

Contracts are used to coordinate disparate but interdependent members of the supply chain. Conflicting objectives of these members and lack of coordination among the members lead to inefficiencies in matching supply with demand. This study reviews different types of contracts and proposes a methodology to be used by companies for analyzing coordinating contracts with their business partners. Efficiency of the contract is determined by comparing the performance of independent companies under the contract to the supply chain performance under the central decision maker assumption. We propose a penalty and reward contract between a manufacturer and its logistics service provider that distributes the manufacturer’s products on its retail network. The proposed contract analysis methodology is empirically tested with transportation data of a consumer durable goods company (CDG) and its logistics service provider (LSP). The results of this case study suggest a penalty and reward contract between the CDG and its LSP that improves not only the individual firm’s objective functions but also the supply chain costs. Compared to the existing situation, the coordination efficiency of the penalty and reward contract is 96.1 %, proving that optimizing contract parameters improves coordination and leads to higher efficiencies

Risk pooling via unidirectional inventory transshipments in a decentralized supply chain

We study risk pooling via unidirectional lateral transshipments between two locations under local decision-making. Unidirectional transshipments can be applicable when cost structures and/or capabilities differ between locations, and it is also a common practice in dual channel supply chains with online and offline sales channels. We show that such a system cannot be coordinated only with varying transshipment prices. The transshipment receiver orders more and the transshipment giver orders less than the respective optimal centralised order quantities. In order to remove this discrepancy, we suggest horizontal coordinationmechanisms by introducing a leftover subsidy for the location providing the transshipments or a shortage subsidy for the location receiving transshipments as well as a combination of shortage and leftover subsidy. Further, we evaluate the impact of network structure by comparing the equilibrium order quantities and profits under the uni- and bidirectional systems as well as a system without transshipments. Since demand correlation is a critical aspect in risk pooling we provide a detailed numerical study to discuss its impact on our findings