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Study on the coordination contract in supply chain under trade credit based on risk compensation

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  • Yan, Jinjiang
  • Wang, Xianyu
  • Cheng, Hong
  • Huang, Lu

Abstract

Trade credit changes the inventory risk between supplier and retailer. This leads to failure in the coordination of the supply chain. Considering that the supplier bears the retailer’s inventory risk under the credit condition, in this paper, the contract is constructed by combining the risk compensation and quantity discount contract to re-coordinate the supply chain and analyze the contract. The results show that the contract can achieve voluntary supply chain coordination; and when the seller’s funds is within a certain range, the coordinate contract can perform in the form of the wholesale price contract, and the wholesale price is influenced by its own funds and product value. In the end, a numerical example is given to verify this conclusion.

Suggested Citation

  • Yan, Jinjiang & Wang, Xianyu & Cheng, Hong & Huang, Lu, 2016. "Study on the coordination contract in supply chain under trade credit based on risk compensation," Chaos, Solitons & Fractals, Elsevier, vol. 89(C), pages 533-538.
    • Handle: RePEc:eee:chsofr:v:89:y:2016:i:c:p:533-538
    DOI: 10.1016/j.chaos.2016.02.040
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    References listed on IDEAS

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    1. Nicholas Wilson & Barbara Summers, 2002. "Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3‐4), pages 317-351, April.
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    4. Nicholas Wilson & Barbara Summers, 2002. "Trade Credit Terms Offered by Small Firms: Survey Evidence and Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3&4), pages 317-351.
    5. D J Robb & E A Silver, 2006. "Erratum: Inventory management under date-terms supplier trade credit with stochastic demand and leadtime," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(6), pages 755-755, June.
    6. Zhou, Yong-Wu & Zhong, Yuanguang & Li, Jicai, 2012. "An uncooperative order model for items with trade credit, inventory-dependent demand and limited displayed-shelf space," European Journal of Operational Research, Elsevier, vol. 223(1), pages 76-85.
    7. Diwakar Gupta & Lei Wang, 2009. "A Stochastic Inventory Model with Trade Credit," Manufacturing & Service Operations Management, INFORMS, vol. 11(1), pages 4-18, November.
    8. D J Robb & E A Silver, 2006. "Inventory management under date-terms supplier trade credit with stochastic demand and leadtime," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(6), pages 692-702, June.
    9. Lee, Chang Hwan & Rhee, Byong-Duk, 2011. "Trade credit for supply chain coordination," European Journal of Operational Research, Elsevier, vol. 214(1), pages 136-146, October.
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