Coordinating Replenishment Decisions in a Decentralized Two-Echelon Supply Chain Using by Revenue Sharing Contract

Abstract

In recent years, coordination and participation in the supply chain have become one of the most important issues. The supply chain members, who are often independent entities, in order to deliver the products to the final consumer with the best quality and the shortest time, should cooperate with other members of the supply chain. In the investigated model, the stochastic demand in a decentralized supply chain is considered and the retailer uses Periodic Review Inventory System that the visit interval is determined by the supplier and he only decides on the service level that determining this amount can affect the supplier s profitability. Therefore, the supplier that has the full authority in determining the visit interval and the order delivery frequency, affects retailer inventory costs. In this paper, firstly decentralized and centralized supply chains are modelled and in order to coordinate the supply chain, the revenue sharing contract is used. Finally, with solve the numerical example, the results show that revenue sharing Contract can create coordination between supply chain s member and Therefore, the profits of them than operated independently increased and the supply chain becomes more efficient.