Study on RP-RS Combined Contract of Three-Level Supply Chain

Abstract

The paper studied the coordination of a three-level supply chain made up of one manufacturer, one distributor and one retailer under the random demand. Firstly, the optimal order quantity is determined with the channel coordination of the supply chain; Secondly, the paper designs a combined contract (rebate-penalty contract & revenue-sharing contract, RP-RS) to coordinate the supply chain, namely, manufacturer offers distributor a rebate-penalty contract and distributor offers retailer a revenue-sharing contract. The paper validates that RP-RS contract can coordinate the three-level supply chain by choosing reasonable parameters. The reasonable choice of parameters can attain the win-win good among all business members, which will help to improve the decision-making capacity and competive ability of businesses involved in the supply chain, and the sizes of parameters in a reasonable range relate to the bargaining position of a business.