Coordination of supply chains by downward direct rebate under symmetric and asymmetric information

Abstract

Promotions have been frequently used by the members of a supply chain as a means to increase sales, revenues, and market share by increasing consumer's awareness about the product, to reduce inventories of items/seasonal products. But a growing body of literature on operations management has suggested that a high degree of supply chain integration is needed to improve the performance of the supply chain. In this paper, a new coordination policy is proposed by using instant rebate and consumer rebate to coordinate the supply chain. It is proved that the proposed policy coordinates a two–echelon supply chain where demand depends on selling price of the retailer under news vendor framework. When both the retailer and the manufacturer have private information, we use fuzzy signed distance technique to derive the value of rebate. Numerical examples are provided to get additional insights on the profit gained by the proposed coordination policy.