IDEAS home Printed from https://ideas.repec.org/a/ids/ijisen/v26y2017i2p247-274.html
   My bibliography  Save this article

Production allocation decision using revenue sharing contract with prior commitments and two-way penalties

Author

Listed:
  • Muhammad Shafiq
  • Huynh Trung Luong

Abstract

In this paper, we propose a revenue-sharing contract with prior-commitments and two-way penalties to facilitate the manufacturer in capacity allocation decisions for a supply chain facing uncertain demand. To motivate the manufacturer to allocate enough capacity, the proposed contract induces the retailers to share capacity investment risk of the manufacturer by making prior commitments about order quantities. The inclusion of under-purchase and over-purchase penalties ensures that the commitment level of each retailer is not too low or too high. Under-supply penalty is also introduced to ensure product availability during selling season and also to compensate the shortage loss of the retailers if manufacturer fails to supply committed quantity. The study also examines quantity allocation trend of the manufacturer at various levels of commitments from the retailers using numerical analyses. Furthermore, coordination performance of the proposed contract is examined at various levels of commitments, revenue sharing percentages, and demand correlation.

Suggested Citation

  • Muhammad Shafiq & Huynh Trung Luong, 2017. "Production allocation decision using revenue sharing contract with prior commitments and two-way penalties," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 26(2), pages 247-274.
    • Handle: RePEc:ids:ijisen:v:26:y:2017:i:2:p:247-274
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=83675
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shafiq, Muhammad & Savino, Matteo M., 2019. "Supply chain coordination to optimize manufacturer's capacity procurement decisions through a new commitment-based model with penalty and revenue-sharing," International Journal of Production Economics, Elsevier, vol. 208(C), pages 512-528.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijisen:v:26:y:2017:i:2:p:247-274. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=188 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.