Research On The Supply Chain Of Secondary Price Reduction Selling

The members are seeking to maximize their own interests, rather than maximizing the profits of the entire system, which is a major challenge in supply chain management. So the major problem of supply chain management is how to establish a reasonable mechanism to coordinating the behavior of each member in order to maximize the total profits instead of their own profits. The mechanism should be characteristic of low cost and easy to implement. Supply chain contract is one of the effective mechanisms to satisfy the above conditions.Most of the traditional supply chain contract assumes that the products' price remains unchanged during the entire sales cycle. However, there are many short-life-cycle products in reality which are characterized by long production lead time as while as the sales cycle is relatively short. They not only faced with demand risk, but also the falls in price. This paper is focus on the short-life-cycle products under reduced price selling.Firstly, this paper introduces the basic theory of supply chain management, analyzes the main reason and negative impact of the supply chain imbalance. The next focus is the supply chain contract theory, including its content, coordination principles and the form of several major contracts.Then, this paper analyzes the two-level supply chain consisting of a single supplier and a single retailer in the framework of classical newsboy model. Return Contract and Markdown-Money Contract models are established. It obtains the necessary conditions to achieve coordination and discusses the division of the coordination. Finally, the models are verified by numerical experiment. It reaches the conclusions that Return Contract is not able to realize the coordination of supply chain because it cannot obtain the Pareto optimize in both parties. However, the Markdown-Money Contract is not only able to realize the coordination of the whole system, but also obtain the Pareto optimize in each party by the division of the new profits.Finally, we take the inter-distributor into consideration and expand the supply chain into three-level. We still build the Markdown-Money Contract model and reach the consideration that this contract is able to realize the maximum of the whole system interests, as well as obtain the Pareto optimize in each party. The related conclusions are verified by numerical experiment in the end.