Abstract:
One effective method for improving the performance of supply chain is making coordination among members of supply chain. This paper studies the subject of coordination of supply chain by using an insurance contract. The supply chain consists of one-manufacturer and one-retailer that the retailer is faced with potential demand and returning of goods from customer. Acceptance of goods returned is a common characteristic of existing competitive market and influences the subject of coordination. In this paper contractual parameters and sale price of goods of manufacturer are determined to achieve a full coordination and win-win condition for both members of supply chain. We compare this contract with revenue sharing contract. The results of research show that for any revenue sharing contract one insurance contract can be defined and in case of selecting contractual parameters properly the manufacturer’s expected profit with insurance contract is improved in relation to revenue sharing contract.
Machine summary:
Aligning a Two-Level Supply Chain Using Insurance Contracts, Under Conditions of Customer Returns and Two-Period Demand Shahrokh Hamtyar1, Kamal Charsooghi 2, Isa Nakhei 3 An effective method for improving supply chain performance is to create alignment between supply chain members.
One of the innovations of this research is to consider customer returns and consider two-period potential demand in a two-level supply chain consisting of a manufacturer and a retailer.
In the current research, the parameters of the insurance contract are defined in such a way that the profit of the supply chain members is improved and win-win conditions are provided for both members.
Petrozi and Dada (1999) discuss price and order quantity decisions in a situation where demand is multi-period, but they do not pay attention to the issue of supply chain alignment.
This research completes the research gap and develops the model by combining two-period demand and customer returns in a two-level supply chain consisting of a manufacturer and a retailer, and achieves greater adaptation to real-world conditions and becomes more practical.
The purpose of this research is to develop the supply chain model and use insurance contracts to create complete alignment in a situation where the retailer faces declining product prices over two periods and customer returns.
Accordingly, the optimal share of the retailer is determined to achieve the optimal channel policy, and the contract parameters are defined in such a way that both members of the supply chain obtain more profit with this contract than in a state of misalignment.
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