Coordination for pull and push contracts in decentralized system with uncertain supply

¹ School of Economics, Ocean University of China, 266100 Qingdao, P.R. China
² Marine Development Studies Institute of OUC, Key Research Institute of Humanities and Social Sciences at Universities, Ministry of Education, 266100 Qingdao, P.R. China
³ School of Management and Engineering, Capital University of Economics and Business, 100070 Beijing, P.R. China

^* Corresponding author: chuhongrui@cueb.edu.cn

Received: 22 May 2019
Accepted: 28 January 2020

Abstract

This paper investigates how a random supply can influence management decisions under pull and push contracts in a decentralized supply chain with one supplier and one retailer. We suppose that the supplier faces yield uncertainty, and we adopt game models to analyse the supply chain members’ decisions (i.e., wholesale price and order quantity) under the two commonly used contracts. Specifically, we analyse the revenue sharing mechanism and buyback mechanism with pull and push contracts, respectively, and find that the buyback contract can efficiently coordinate the supply chain with push contract, while the revenue sharing contract cannot improve the performance with a pull contract. Then we design a modified revenue sharing contract that introduces a subsidy for excess inventory and shows that for the pull case, the proposed mechanism can coordinate the supply chain effectively. Finally, the analysis results are displayed intuitively by numerical cases.