E-commerce supply chain inventory decisions and contract design considering sales effort and risk aversion

Abstract

We introduce vendor-managed inventory (VMI) modes and retailer-managed inventory modes and use conditional value-at-risk to quantify the inventory manager’s risk aversion. Then, we compare the supply chain (SC) members’ optimal decisions and expected utilities when the online retail platform or the supplier conducts sales effort under different inventory modes. The cost-sharing contracts are introduced to optimize the SC performance. Some interesting findings are achieved: for VMI SC, SC members’ sales-effort preferences change with the wholesale price; the inventory manager’s risk-aversion degree has a significant impact on the SC members’ preferences for inventory management modes; there always exists appropriate cost-sharing ratio regions in which the SC members’ expected utilities can be improved. The corresponding research results can help to improve the operational effectiveness of different kinds of SCs.