Supply Chain Coordination by Contracts with Inventory Holding Cost Share

Supply Chain Coordination by Contracts with Inventory Holding Cost Share

Alejandra Gomez-Padilla
Copyright: © 2009 |Pages: 12
DOI: 10.4018/jisscm.2009040103
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Abstract

In this document it is analyzed the importance of contracts for coordination between two companies in a supply chain. In the studied situation, one company, or supplier, supplies one product to the other company, who is a retailer. The companies are going to coordinate by two types of decisions: economic (concerning prices fixed on a contract), and physical exchange (concerning the inventory to be held). Two types of contracts will be presented: one contract with a simple pricing scheme and two contracts with inventory holding cost shared among the companies of the supply chain. The objective is to show that contracts with inventory holding cost share allow the two companies to efficiently coordinate the chain they form.

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