Coordination Mechanism in a Retailer-led Supply Chain Considering -Value-added Logistics Service Based on an Option Contract

Abstract

Abstract:

The system operates under a mode in which the retailer acts as a Stackelberg leader while the manufacturer, the follower, is responsible for the transportation. Considering the value-added logistics service, a two-stage Stackelberg game model is developed under the situation that the logistics service influences the market demand. Research shows that the manufacturer′s production and logistics service level in decentralized system are lower than the corresponding results in the centralized one. Then, an option contract and a logistics service cost sharing contract are introduced into the system which can coordinate the system effectively. Finally, the feasibility of the above contract combination is verified by a numerical example, with changes of option price, initial ordering quantity and expected profit with respect to the logistics service cost sharing coefficient all analyzed.

Key words: supply chain management, option contract coordination, Stackelberg game, valueadded logistics service

FENG Ying1, WU Qian1, YU Yunlong2. Coordination Mechanism in a Retailer-led Supply Chain Considering -Value-added Logistics Service Based on an Option Contract[J]. Industrial Engineering Journal .

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