Composite Contracts in Supply Chain

Abstract

Supply chain coordination is very important nowadays because of the increasing number of cooperating partners. Contracts can be used in order to provide a framework for the partners’ cooperation. In this paper, two contract types are analysed. Take-it-or-leave-it contracts are often used by decentralized supply chains, but include some attributes from centralized settings. The quantity discount can be used in any type of supply chain. Centralized and decentralized settings of supply chains are also discussed in the paper. A numerical example compares the rates which determine the coordination power of the contract types. The paper suggest some other composite contracts to enhance the performance of supply chains.