—For improving the operation of supply chain it is necessary to use coordination mechanisms. This paper investigates the subject of coordination in two-level supply chain using contracts mechanism. By applying contractual relationships among members of a supply chain, double marginalization can be eliminated. We consider a supply chain consisting of one manufacturer and one retailer. A stochastic and two-periodic demand is considered. For obtaining more conformation of model with real conditions, it is assumed that the retailer is faced with return of goods from customer. We determine contractual parameters for achieving the coordination. Modeling and determination of parameters will be done in such a way that win-win condition is provided for both members of supply chain. We compare insurance contract with revenue sharing contract. We find that the expected profit of the supplier with insurance contract will be improved in compared with the revenue sharing contract.
—Coordination, insurance contract, supply chain management, two-period demand.
Shahrokh Hematyar is with the Department of Industrial Engineering Payame Noor University, Tehran, Iran (e-mail: firstname.lastname@example.org).
Kamal Chaharsooghi is with the Department of Industrial Engineering, Tarbiat Modaress University, Tehran, Iran (e-mail: email@example.com).
Cite: 128-S018, "Coordinating a Supply Chain with Customer Returns and Two-Period Newsboy Problem Using Insurance Contract," International Journal of Materials, Mechanics and Manufacturing vol. 2, no. 3, pp. 202-209, 2014.