Revenue-Sharing Contract Design in a Supply Chain Based on Capacity Investments

Abstract

Abstract:

Companies often face significant technical and financial risks when building new factories to expand capacity. Coordination of supply chain members in capacity investments can reduce risk. This paper considered a supply chain which consisted of one supplier and two manufacturers. One of the manufacturers provided capacity investment for the upstream supplier. In return, the supplier shared some portion of its revenue with the manufacturer. This paper studied the optimal contract designs under different modes of collaboration between the manufacturer and the supplier. It analyzed the effect of optimal contracts on optimal decisions of supply chain members and on their respective profits. It obtained several insights through numerical simulations which were useful in actual negotiation.

Key words: capacity investment, revenue sharing, contract design, supply chain collaboration

CLC Number:

F 253.3

ZHU Chenhuia，DONG Mingb,LIU Shaoxuanb. Revenue-Sharing Contract Design in a Supply Chain Based on Capacity Investments

[J]. Journal of Shanghai Jiaotong University, 2014, 48(02): 312-316.

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