Copyright © 2013 Hongjun Peng and Meihua Zhou. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper explores the quantity discount coordination models in the fashion supply chain with uncertain yields and random demand. The paper proves that, under the independent and noncoordinated decision patterns, there exists a Nash equilibrium between the supplier and the manufacturer which reduces the supply chain's profit margin. In order to achieve the “optimal” centralized supply chain expected profit margin, new quantity discount models have been established. Both the supplier-oriented and the manufacturer-oriented Stackelberg supply chain gaming models are investigated. Our analytical and numerical analyses show that the quantity discount contract proposed in this paper can largely reduce the negative influence brought by the uncertainty of yields and demand. Therefore, the profit margin of supply chains based on quantity discount can reach the optimal level of the supply chain under the centralized setting.