Key words: Supply-chain contracting; forecasting; buy backs; quantity flexibility; Bayesian inventory.
We examine both price-based returns mechanisms (buy backs) and quantity-based returns mechanisms (quantity flexibility contracts).Key words: supply chain management; assembly systems; revenue-sharing contract; wholesale-price contract Submissions and Acceptance: Received July 2002; revision received May 2003; accepted August 2003. There is a positive probability that the retailer is capable of gaining improved demand information through costly forecasting.The supplier would like to induce the retailer to forecas ..." We consider a supply chain consisting of one supplier selling through one retailer who faces a newsvendor problem.We then explore a wholesale-price-driven scheme, both as a single lever and in combination with buybacks.
The channel performance of a wholesale-price-only scheme is shown to degrade with the number of suppliers, which is not the case with a revenue-share-only contract. We consider a supply chain consisting of one supplier selling through one retailer who faces a newsvendor problem.
While every firm in a supply chain bears supply risk (the cost of insufficient supply), some firms may, even with wholesale price contracts, completely avoid inventory risk (the cost of unsold inventory).