Coordination and competition in two-echelon supply chain using grey revenue-sharing contracts

Abstract

PurposeThis study examines the potential of contracts as one of the supply chain coordination mechanisms under competitive conditions. It also investigates a two-echelon supply chain model with two manufacturers and two retailers to develop a competitive structure in grey stochastic demand.Design/methodology/approachSupply chain demand is considered as a stochastic phenomenon depending on the selling price of the product. Also, products can be replaced by market manufacturers. Each retailer faces the pricing of products from two manufacturers, leading to competition between downstream retailers. In the present study, the duopoly supply chain model was presented based on the wholesale price contract, revenue-sharing contract and quantity discount contract separately.FindingsGrey optimization and analysis of their coordination were presented. The results showed the high performance of revenue-sharing contracts in the supply chain. Thus, manufacturers will give the next priority to quantity discount contracts.Originality/valueOrdering is the main factor contributing to competitive decision-making. Meanwhile, decision-making along with ordering and pricing will be required due to the nature of the demand.