Supply Chain Coordination With Revenue-Sharing Contract

In the current competitive market environment, the decision-making model of an enterprise is transformed from an independent decision to a collaborative decision in supply chain. This is because independent made decision by one player will not result in supply chain's optimum. The optimality will only be realized when all the players are considered simultaneously.Collaboration between supply chain management partners is a good solution to gain an advantageous competition position. So this paper choose supply chain contracts to coordinate supply chain. Especially, we focus on the revenue-sharing contract to research collaboration and coordination of supply chain.The purpose of the research is to analyze the supplier and retailer's performance of supply chain. First, we discuss 2-tier supply chain including a supplier and a retailer under revenue-sharing contracts. The research focus on the problem by dividing the retailers' number. We first discuss the coordination of supply chain under revenue-sharing contract with only one supplier and one retailer. The analysis considered centralized and decentralized supply chain contracts. The objective of this study is to derive the optimum order quantity and the percent of revenue sharing. We compared the two decentralized models and found that the revenue-sharing contract has good performance. The optimal solution lets the retailer and supplier gain higher profit when using the revenue sharing contract. The study then extends the classical newsboy problem to N retailers. We discuss the revenue sharing contract with the same and different parameters. Research methodology of the model development is based on probability, statistic theory and game theory. The objective of the model is to max the profit and found the optimal quantity. Finally numerical examples are carried out to illustrate the application of the model that using revenue-sharing contract can achieve coordination of supply chain. From the mathematical modeling, numerical examples, it is seen that the optimal order quantity may cause the win-win result to both the supplier and the retailer.