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Coordination of random yield supply chains with improved revenue sharing contracts

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  • Jiarong Luo
  • Xu Chen

Abstract

This article examines the role of revenue sharing contracts in the coordination of supply chains with random yield and stochastic market demand. With game theory models, we derive the retailer's optimal order policy and the supplier's optimal production policy under revenue sharing contracts. We find that the traditional revenue sharing contract is no longer able to coordinate the supply chain in the context of random yield and stochastic demand. Nonetheless, when combined with a surplus subsidy mechanism (improved revenue sharing contracts), it can coordinate the supply chain and simultaneously allow the supply chain profit to be divided between the two firms arbitrarily by choosing proper contract parameters. Finally, we illustrate the results via numerical examples. [Received 2 August 2014; Revised 1 December 2014; Revised 14 February 2015; Accepted 3 May 2015]

Suggested Citation

  • Jiarong Luo & Xu Chen, 2016. "Coordination of random yield supply chains with improved revenue sharing contracts," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 10(1), pages 81-102.
    • Handle: RePEc:ids:eujine:v:10:y:2016:i:1:p:81-102
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    Cited by:

    1. Yan Shi & Fulin Wang, 2022. "Agricultural Supply Chain Coordination under Weather-Related Uncertain Yield," Sustainability, MDPI, vol. 14(9), pages 1-12, April.
    2. Anderson, Edward & Monjardino, Marta, 2019. "Contract design in agriculture supply chains with random yield," European Journal of Operational Research, Elsevier, vol. 277(3), pages 1072-1082.
    3. Chen, Xu & Wang, Xiaojun & Chan, Hing Kai, 2017. "Manufacturer and retailer coordination for environmental and economic competitiveness: A power perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 97(C), pages 268-281.
    4. Jiarong Luo & Xu Chen & Chong Wang & Gaoxun Zhang, 2021. "Bidirectional options in random yield supply chains with demand and spot price uncertainty," Annals of Operations Research, Springer, vol. 302(1), pages 211-230, July.
    5. Peng, Hongjun & Pang, Tao, 2019. "Optimal strategies for a three-level contract-farming supply chain with subsidy," International Journal of Production Economics, Elsevier, vol. 216(C), pages 274-286.

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