Article ID: | iaor20162903 |
Volume: | 23 |
Issue: | 6 |
Start Page Number: | 1163 |
End Page Number: | 1183 |
Publication Date: | Nov 2016 |
Journal: | International Transactions in Operational Research |
Authors: | Huang Weilai, Han Yi, Cai Jianhu, Hu Xiaoqing, Cheng Haifang |
Keywords: | inventory, programming: multiple criteria, combinatorial optimization |
In this paper, we propose an option contract for a two‐echelon supply chain operating under vendor‐managed inventory (VMI). We find that the supply chain coordination and Pareto improvement can be achieved synchronously. As a comparison, a subsidy contract is introduced to coordinate the supply chain. The paper further considers the influence of a replenishment tactic on the performance of the supply chain. After introducing a replenishment tactic, the supply chain can replenish the products to satisfy unmet demand during the selling season. We further use an option contract to coordinate the supply chain, and a Pareto improvement can be gained. All our findings are numerically illustrated.