Research On Revenue-Sharing Contract Under OF-F

Supply chain contract has been the focus of supply chain coordination researchand the study has focused on the situation of plenty of funds now. It is undeserved thatthe majority of existing literatures neglect the impact on the supplier’s funds levels.Funds level is the important factor and it affects the enterprises’ decisions in real life.In fact, many companies have the problem of financial constraints because of theproduct diversification and increased competition. Credit sales are used by more andmore enterprises. Large quantity of accounts receivable from credit sales not onlyreduces a business’ the velocity of cash but it also takes great financial risks toenterprises. So reviving the accounts receivable becomes the important way to solvethe problem of financial constraints. An investigative reporter from Aberdeendiscovered that many suppliers think factoring is one of the best and the new ways offinancing in the future.Many literatures about factoring are been qualitative, and there is few study ofusing factoring to supply chain contracts from the literature. So the paper integratingfinancing mechanism into the supply chain with financial constraints better reflectsreal conditions. The paper assumes that the suppliers lack the funding when they startstocking the goods and so there is no delivery(that is no accounts receivable).Factoring can not be used if there is accounts receivable. While order financing canresolve the problem but there are still some weaknesses in order financing. So thepaper uses the new financing model--OF-F model and it is formed by order financingand factoring. The problem could be resolved and the advantages of factoring couldexert better when we use OF-F model. So the paper studies the supply chaincoordination with revenue-sharing contract based on two financing mechanism (directfinancing&OF-F). The two-stage supplier-leading supply chain composed of onesupplier and one manufacturer.When the supplier lacks the fund, the models of revenue-sharing contractbetween supplier and manufacturer are built under two financing mechanism (directfinancing&OF-F). And the financing rates model is designed with theprice-depended demand. Then the paper analyses models of profit allocation undertwo different financing models. Obtained results from each model are: whether under the direct financing and OF-F, revenue-sharing contract could coordinate the supplychain with price-sensitive demand. The total proceeds of the supply chain under OF-Fis higher when comparing the direct financing and OF-F; the manufacturer benefit isimproved and the supplier’s is decreased when the manufacturer’s default probabilityis very small. Revenue-sharing contract can distribute the profit reasonably andimprove the operational performance of entire supply chain under OF-F. Finally theresults are analyzed with a numerical example.