Coordination of a Supply Chain with Satisficing Objectives Using Contracts

Coordination of a Supply Chain with Satisficing Objectives Using Contracts

C. Shi (Wilfrid Laurier University, Canada) and B. Chen (Washington State University, USA)
Copyright: © 2007 |Pages: 20
DOI: 10.4018/978-1-59904-255-8.ch012
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Setting performance targets and managing to achieve them is fundamental to business success. As a result, it is common for managers to adopt a satisficing objective—that is, to maximize the probability of achieving some preset target profit level. This is especially true when companies are increasingly engaged in short-term relationships enabled by electronic commerce. In this chapter, our main focus is a decentralized supply chain consisting of a supplier and a retailer, both with the satisficing objective. The supply chain is examined under three types of commonly used contracts: wholesale price, buy back, and quantity flexibility contracts. Because a coordinating contract has to be Pareto optimal regardless of the bargaining powers among the agents, we first identify the Pareto-optimal contract(s) for each contractual form. Second, we identify the contractual forms that are capable of coordination of the supply chain with the satisficing objectives. In contrast to the well-known results for the supply chain with the objectives of expected profit maximization, we show that wholesale price contracts can coordinate the supply chain with the satisficing objectives, whereas buy back contracts cannot. Furthermore, quantity flexibility contracts have to degenerate into wholesale price contracts to coordinate the supply chain. This provides an important justification for the popularity of wholesale price contracts besides their simplicities and lower administration costs. Finally, we discuss possible extensions to the model by considering different types of objectives for different agents.

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Table of Contents
Chapter 1
P. Boonyathan, L. Al-Hakim
Today’s managers are turning to the functions of the supply chain to improve margins and gain competitive advantage. The explosion of the Internet... Sample PDF
Procedure for Modeling and Improving E-SCM Processes
Chapter 2
S. Yang
In recent years, e-retailing has become the growth engine for the retailing industry. A large online retailer usually has multiple distribution... Sample PDF
Dynamic Transshipment in the Digital Age
Chapter 3
R. Craig
This chapter considers the perspective of small and medium-sized enterprises (SMEs) in supply chains. It starts with an overview of the important... Sample PDF
E-Com Supply Chain and SMEs
Chapter 4
J. Hamilton
This chapter addresses the development cycle of recent ‘services’ models. It considers that all products involve services and consequently maybe be... Sample PDF
Building and Managing Modern E-Services
Chapter 5
J. Hamilton
This chapter addresses service value networks as a key pathway to establishing and likely retaining future strong competitive positioning within a... Sample PDF
Service Value Networks: Delivering Competitive E-Services
Chapter 6
V. Potdar
In this chapter we provide an introduction to RFID technology. We discuss the main components of the RFID technology, which includes RFID... Sample PDF
Automated Data Capture Technologies: RFID
Chapter 7
W. Baker, G. Smith, K. Watson
Collaboration between supply chain partners, facilitated by integration of information flows, has created more efficient and effective networks.... Sample PDF
Information Security Risk in the E-Supply Chain
Chapter 8
O. Bak
The supply chain environment today is a collaborative business environment in which the members of supply chains are interlinked with each other.... Sample PDF
The Use of Collaboration Tools in Supply Chain: Implications and Challenges
Chapter 9
G. Finnie, Z. Sun
This chapter reviews fundamentals of e-supply chain management and examines the transformation from the traditional supply chains to the e-supply... Sample PDF
Negotiation, Trust, and Experience Management in E-Supply Chains
Chapter 10
P. Tiako
As the Internet grew and evolved, it became more widely used by everyone. What once was utilized by the military and used for academic purposes is... Sample PDF
Trading E-Coalition Modeling for Supply Chain
Chapter 11
R. Pal, I. Bose, A. Ye
ERP and SCM systems have been used in China for some time. Although these two systems complement each other, the integration of these two systems is... Sample PDF
E-Supply Chain System at Valvex and Its Integration with ERP Systems
Chapter 12
C. Shi, B. Chen
Setting performance targets and managing to achieve them is fundamental to business success. As a result, it is common for managers to adopt a... Sample PDF
Coordination of a Supply Chain with Satisficing Objectives Using Contracts
Chapter 13
R. Manjunath
Maintaining the service quality in a supply chain has become a challenging task with increased complexity and number of players down the line. Often... Sample PDF
Information Feedback Approach for Maintaining Service Quality in Supply Chain Management
Chapter 14
Performance Management  (pages 261-282)
S. Srinivas
The purpose of this chapter is to help you design a performance management framework that will result in choosing, successfully implementing, and... Sample PDF
Performance Management
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