Research on the Supply Chain Coordination of the Buyback Contract Based on Sales Effort

Abstract

Under demand uncertainty, the issue of how to use buyback contract to achieve supply chain coordination has been a hot topic in supply chain management. In a two-echelon supply chain, consists of a single supplier and a single retailer, we used Stackelberg game method to study the buyback contract model under such conditions that whether the retailer made sales effort or not. The result shows that: (1) the buyback contract model in which the retailer does not make sales effort can achieve supply chain coordination when the shortage cost exists and the supplier does not provide sales incentives; (2) the buyback contract model in which the retailer makes all or part sales effort cannot achieve supply chain coordination but can improve the profits of the supply chain when the shortage cost exists and the supplier does not provide sales incentives; (3) the buyback contract model in which the retailer makes all sales effort can achieve supply chain coordination when the supplier provides sales incentives to the retailer. And in this condition, if the supplier adjusts the wholesale price, when the wholesale price increases, the retailer’s profits will decrease and the supplier’s profits will increase, by using the buyback reward contract, the model can achieve the supply chain coordination.