Abstract: A two-level MTO (make to order) supply chain composed of one dealer and one manufacturer is considered in this paper. With time-and-price sensitive demands taken into account, a model for the supply chain revenue is derived. Based on the model, the impact of response time on the decisions for the manufacturer and dealer under decentralized decision making are presented, respectively. It is found that the supply chain cannot be perfectly coordinated under decentralized decision making. Furthermore, it shows that the supply chain cannot be coordinated by using revenue-sharing contract. However, under certain conditions, the supply chain can be well-coordinated by using two-part tariff contract. A numeric example is used to demonstrate the findings.

Key words: supply chain coordination, time-and-price sensitive demands, revenue-sharing contract, two-part tariff contract