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A quantity-flexibility contract with coordination

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  • Li, Xin
  • Lian, Zhaotong
  • Choong, Kwee Keong
  • Liu, Xiaoming

Abstract

Motivated by the unique pricing and the contractual structure between a manufacturer and its retailers, and the uncharacteristic manner in the commercialization of newly developed products in the cosmetic industry, this paper studies a quantity-flexibility (QF) contract between a cosmetic manufacturer and a retailer with supply-chain coordination (SCC). By this QF and SCC arrangement, the retailer commits an amount of quantity of newly-developed products, and in return the manufacturer allows the retailer to adjust the order quantities of the commitment quantities based on the inventory balance status and the likely customer demand. We envisage that with this arrangement, both parties can attain maximum profit under the concept of the synergy effect. By developing a two-period dynamic model, we obtain an optimal replenishment strategy for the retailer and the optimal pricing scheme for the manufacturer. By comparing it between models with and without the SCC or quantity adjustment (QA), the numerical analysis and our case application support our theoretical model assertion that the synergy of attaining global (channel) optimal profit for both the manufacturer and the retailer is feasible. The results also show that the advantages of the QF contract with the SCC is very significant.

Suggested Citation

  • Li, Xin & Lian, Zhaotong & Choong, Kwee Keong & Liu, Xiaoming, 2016. "A quantity-flexibility contract with coordination," International Journal of Production Economics, Elsevier, vol. 179(C), pages 273-284.
    • Handle: RePEc:eee:proeco:v:179:y:2016:i:c:p:273-284
    DOI: 10.1016/j.ijpe.2016.06.016
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    Cited by:

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    2. Qiang Han & Yuyan Wang, 2018. "Decision and Coordination in a Low-Carbon E-Supply Chain Considering the Manufacturer’s Carbon Emission Reduction Behavior," Sustainability, MDPI, vol. 10(5), pages 1-23, May.
    3. Lijo John & Anand Gurumurthy, 2022. "Are quantity flexibility contracts with discounts in the presence of spot market procurement relevant for the humanitarian supply chain? An exploration," Annals of Operations Research, Springer, vol. 315(2), pages 1775-1802, August.
    4. Lu Zhang & Deqing Ma & Jinsong Hu, 2021. "Research on the Sustainable Operation of Low-Carbon Tourism Supply Chain under Sudden Crisis Prediction," Sustainability, MDPI, vol. 13(15), pages 1-25, July.
    5. Wei Liu & Shiji Song & Ying Qiao & Han Zhao, 2020. "Supply Chain Coordination with a Loss-Averse Retailer and Combined Contract," Mathematics, MDPI, vol. 8(4), pages 1-20, April.
    6. Li, Jianbin & Luo, Xiaomeng & Wang, Qifei & Zhou, Weihua, 2021. "Supply chain coordination through capacity reservation contract and quantity flexibility contract," Omega, Elsevier, vol. 99(C).
    7. Heydari, Jafar & Govindan, Kannan & Ebrahimi Nasab, Hamid Reza & Taleizadeh, Ata Allah, 2020. "Coordination by quantity flexibility contract in a two-echelon supply chain system: Effect of outsourcing decisions," International Journal of Production Economics, Elsevier, vol. 225(C).
    8. Li, Xin & Lian, Zhaotong & Pang, Chuan, 2020. "Efficient coordination of supply contracts with demand learning and two production modes," International Journal of Production Economics, Elsevier, vol. 225(C).
    9. Cai, Jianhu & Hu, Xiaoqing & Jiang, Feiying & Zhou, Qing & Zhang, Xiaoyang & Xuan, Liyuan, 2019. "Optimal input quantity decisions considering commitment order contracts under yield uncertainty," International Journal of Production Economics, Elsevier, vol. 216(C), pages 398-412.

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