On channel coordination through revenue-sharing contracts with price and shelf-space dependent demand

Abstract

a b s t r a c tThis paper deals with the problem of coordinating a vertically separated channel under a consignment contract with revenue sharing. We consider the demand of the downstream player, e.g., the retailer, being price and shelf-space sensitive. Under such a setting, the retailer decides on the revenue-sharing percentage and the slotting fee. And the upstream player, e.g., the manufacturer, decides on the retail price and the size of shelf-space. For each item sold, the retailer deducts an agreed-upon percentage from the selling price and remits the balance to the manufacturer. We model the decision-making of the two firms as a Stackelberg game, and carry out equilibrium analysis for both the centralized and decentralized regimes of the channel, with and without cooperation. In addition, a profit sharing scheme through a two-part slotting allowance is proposed, which leads to Pareto improvements among channel participants. Our analysis reveals that the noncooperative game tends to set a higher revenue-sharing percentage and lower slotting fee by the retailer, and a higher retail price and less display space by the manufacturer, which leads to a lower channel profit. The consistent bias can be perfectly rectified by the cooperative game through the proposed two-part contractual agreement.

Coordinating a closed-loop supply chain using a bargaining power approach

“…De Giovanni and Roselli (2012) proposed a support programme to remedy the myopically behaved drawbacks in a vendor-buyer channel under such a contractual agreement. Under consignment contracting, the retailer offers the manufacturer a revenue-sharing percentage and the manufacturer responses by setting the stocking quantity and/or retail price (Chen, Cheng, & Chien, 2011;Chen, Cheng, & Lin, 2011;Wang, Jiang, & Shen, 2004). Ours is under the revenue sharing without consignment contracting that is partially motivated by the local government's recycling programmes (Pennsylvania Department of Environmental Protection, 2005).…”

Coordinating a supply chain for deteriorating items with multi-factor-dependent demand over a finite planning horizon

“…Zhou et al [12] adopted the RS contract and quantity discount contract to coordinate a one-manufacturer and one-retailer supply chain in which the demand rate is deterministic and sensitive to the current inventory level. Assuming that demand is affected by the price and shelf-space, Chen et al [13] used the RS contract to coordinate a one-supplier and one-retailer supply chain. In the context of the model developed by Zhou et al [12], Panda [14] assumed that the demand rate is affected by the current inventory level and price and showed that the supply chain cannot be coordinated by the RS contract whereas it can be coordinated perfectly by a revenue-and cost-sharing contract.…”

Information and profit sharing between a buyer and a supplier: Theory and practice

“…Then centralized decision-making is applied in section 4.2. This, too, is a common procedure in the supply chain literature (Chen, Cheng, & Chien, 2011;Krishnan, Kapuscinski, & Butz, 2004;Raju & Zhang, 2005;Zhang & Chen, 2013).…”