Abstract
When the demand is sensitive to retail price, revenue sharing contract and two-part tariff contract have been shown to be able to coordinate supply chains with risk neutral agents. We extend the previous studies to consider a risk-averse retailer in a two-echelon fashion supply chain. Based on the classic mean-variance approach in finance, the issue of channel coordination in a fashion supply chain with risk-averse retailer and price-dependent demand is investigated. We propose both single contracts and joint contracts to achieve supply chain coordination. We find that the coordinating revenue sharing contract and two-part tariff contract in the supply chain with risk neutral agents are still useful to coordinate the supply chain taking into account the degree of risk aversion of fashion retailer, whereas a more complex sales rebate and penalty (SRP) contract fails to do so. When using combined contracts to coordinate the supply chain, we demonstrate that only revenue sharing with two-part tariff contract can coordinate the fashion supply chain. The optimal conditions for contract parameters to achieve channel coordination are determined. Numerical analysis is presented to supplement the results and more insights are gained.
Highlights
Fashion supply chain is characterized by short product life cycle, high volatile customer demand, and clients’ varying tastes [1]
We firstly investigate the problem of coordinating a two-stage fashion supply chain under single contracts including revenue-sharing contract, two-part tariff contract and sales rebate and penalty contract
After proving that revenue-sharing contract and two-part tariff contract could still achieve channel coordination in this context while a more complex sales rebate and penalty cannot, we further explore the role of combined contracts in supply chain coordination
Summary
Fashion supply chain is characterized by short product life cycle, high volatile customer demand, and clients’ varying tastes [1]. The fashion retailer, acting as the follower, sets self-interest order quantity and retail price as a response We propose both single contracts and combined contracts with the optimal values of contract parameters to achieve channel coordination within fashion supply chain. The main objectives of our study cover the following: firstly, to explore whether the coordinating revenue-sharing contract and two-part tariff contract in supply chains with risk neural retailer can still coordinate the fashion supply chain with risk-averse retailer who has to choose retail price in addition to stocking quantity; secondly, to compare the performance of a more complicated sales rebate and penalty contract in supply chain coordination with the performances of revenue-sharing contract and two-part tariff contract; when joint contracts are got by taking advantages of the three single contracts, to probe whether the resulting combined contracts are useful to coordinate the supply chain.
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