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A composite contract for coordinating a supply chain with sales effort-dependent fuzzy demand

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Abstract

In this paper, we study the coordination problem for a supply chain composed of one supplier and one retailer when the demand is a fuzzy variable that is dependent on sales effort. We find that neither a buyback contract nor a promotion cost-sharing contract can coordinate the supply chain in this setting. Furthermore, we design a composite contract by combining a buyback contract with a promotion cost-sharing contract to coordinate the supply chain and analyze the coordination conditions. We also draw a performance comparison of the designed composite contract and the price-only contract for the profit maximization of the supply chain and present some extensions. Finally, the main theoretical results and the effectiveness of the designed composite contract are illustrated with numerical examples. We show that the production cost and sensitivity parameter of effort cost have negative impacts on the expected profits of the supplier, the retailer and the entire supply chain, whereas basic demand and the sensitivity parameter of demand stimulation have positive impacts on their profits.

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Acknowledgements

This research was supported by the National Natural Science Foundation of China (Nos. 71471126, 61402260), Hubei Province Natural Science Foundation of Key Project (No. 2015CFA144) and the Special Funds of Taishan Scholars Project of Shandong Province.

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Authors and Affiliations

  1. School of Management Science and Engineering, Shandong University of Finance and Economics, Jinan, 250014, China

    Xiaobin Wang

  2. College of Mathematics and Physics, Huanggang Normal University, Hubei, 438000, China

    Zhibing Liu & Huiru Chen

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  1. Xiaobin Wang
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  2. Zhibing Liu
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Correspondence to Zhibing Liu.

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Wang, X., Liu, Z. & Chen, H. A composite contract for coordinating a supply chain with sales effort-dependent fuzzy demand. Int. J. Mach. Learn. & Cyber. 10, 949–965 (2019). https://doi.org/10.1007/s13042-017-0774-5

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