Supply chain coordination with risk sensitive retailer under target sales rebate

Chun Hung Chiu, Tsan Ming Choi, Xun Li

Research output: Journal article publicationJournal articleAcademic researchpeer-review

67 Citations (Scopus)

Abstract

Target sales rebate (TSR) contracts have been shown to be useful in coordinating supply chains with risk-neutral agents. However, there have been few studies on the cases with risk sensitive agents. As a result, based on the classic Markowitz portfolio theory in finance, we carry out in this paper a meanvariance (MV) analysis of supply chains under TSR contracts. We study a supply chain with a single supplier and a single risk averse retailer. We propose TSR contracts for achieving coordination. We demonstrate how TSR contracts can coordinate the supply chain which takes into consideration the degree of risk aversion of the retailer. We find that the supplier can coordinate the channel with flexible TSR contracts. In addition, we extend the supply chain model to include sales effort decision of the retailer. Conditions for TSR contracts to coordinate the supply chain with sales effort of retailer are also derived.
Original languageEnglish
Pages (from-to)1617-1625
Number of pages9
JournalAutomatica
Volume47
Issue number8
DOIs
Publication statusPublished - 1 Aug 2011

Keywords

  • Meanvariance analysis
  • Supply chain management
  • Target sales rebate contract

ASJC Scopus subject areas

  • Control and Systems Engineering
  • Electrical and Electronic Engineering

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