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Discrete Dynamics in Nature and Society
Volume 2014 (2014), Article ID 561081, 10 pages
http://dx.doi.org/10.1155/2014/561081
Research Article

Coordinating Three-Level Supply Chain by Revenue-Sharing Contract with Sales Effort Dependent Demand

Business Management School, HoHai University, Changzhou 213022, China

Received 19 March 2014; Revised 4 July 2014; Accepted 15 July 2014; Published 5 August 2014

Academic Editor: Xiaolin Xu

Copyright © 2014 Qinghua Pang et al. 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

Revenue-sharing contract is a kind of mechanism to improve performance or to achieve perfect coordination of supply chain. Considering a three-level supply chain consisting of a manufacturer, a distributor, and a retailer who faces a stochastic and sales effort dependent demand, the paper analyzes the impact of sales effort on supply chain coordination and expounds the reasons why traditional revenue-sharing contract cannot coordinate supply chain in this condition. Given three cases: only the retailer bears the sales effort cost, only the manufacturer bears the sales effort cost, and the retailer bears the sales effort cost with the manufacturer, the paper proposes an improved revenue-sharing contract based on quantity discount policy to coordinate the supply chain. It illustrates that improved revenue sharing contract can coordinate supply chain by implementing it in one transaction or two transactions of three-level supply chain. The model of improved revenue-sharing contract is optimized, respectively, by addition form and multiplication form with sales effort dependent demand. Formulas are given to determine the optimal contract parameters. Finally, numerical experiments are given to test the accuracy of the model of improved revenue-sharing contract.