The Contract Game of Inventory Management in Supply Chain

Abstract

This paper, from the perspective of game theory, has analyzed the factors that can influence the cooperative relationship of both the upstream and downstream enterprises' inventory management in the supply chain. It has also explored the significant role played by the contract upon the overall optimization of inventory management, and established the finite game model without contract, the infinite game model without contract, the finite game model with contract and the infinite game model with contract respectively between the manufacturers and distributors. The results show that contract does not only guarantee the consistent achievement of the solidified cooperation and spur the manufacturers and distributors to form a strategic cooperative partnership, but also is the pivotal nexus of the overall optimization of inventory management in supply chain. Thus, in the inventory management system of the supply chain, it is necessary to establish a certain contract to bind the behaviors of participant enterprises.