Supply Chain Buyback Contract Based on the Different Expectations of Market Demand Distribution

Abstract

Nowadays, the members in a supply chain are seen as an integrity. In order to maximize the supply chain profit, the authors consider a contract of buyback. In this article, they focus on a single manufacturer and a single retailer in the supply chain. In order to match the market demand, a new perspective is introduced into the buyback contract model. By comparing the predicted demand of the manufacturer and the retailer with the real demand, they will obtain four quadrants about the difference of the market demand forecasts. By combining the profit models with different market demand forecasts in the four quadrants, the closed-form optimal market model is created. The solutions of the optimal price and the optimal quantity under the centralized mode, non-contract decentralized mode and buyback contract mode are compared. The authors find that the non-contract decentralized mode model cannot successfully coordinate the supply chain, while the buyback contract mode allows for the coordination of the supply chain and the generation of more profit from the supply chain. From this new perspective of the supply chain contract, a reasonable result can be obtained. Numerical examples are provided to illustrate the results, with analysis conducted on the model.