Coordination with no risk sharing and risk sharing discount contracts in two echelon supply chains

Abstract

Production and procurement management in a supply chain are considerably affected by random yield. This paper considers a supply chain that includes a supplier who is faced with random yield production and two retailers who are faced with uncertain demand. Using Stackelberg game, two models are presented regarding discount coordination retailers with respect to the risk sharing and no risk sharing contracts. The supplier specifies quantity discount percentage and a wholesale price. Then, retailers determine their optimal order quantity in which their profit is maximised. Finally, the supplier determines the production quantity. Moreover, comparing the contracts shows that how the supply chain's performance enhances under certain conditions in risk sharing contract. Furthermore, numerical examples are presented to illustrate the presented models.