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Mathematical Problems in Engineering
Volume 2011, Article ID 985104, 24 pages
Research Article

Optimal Ordering Policy and Coordination Mechanism of a Supply Chain with Controllable Lead-Time-Dependent Demand Forecast

1Department of Management Science and Engineering, Nanjing University of Science and Technology, Nanjing 210094, China
2Department of Industrial Engineering, Jiangsu University, Zhenjiang 212013, China

Received 8 November 2010; Revised 20 May 2011; Accepted 6 July 2011

Academic Editor: J. J. Judice

Copyright © 2011 Hua-Ming Song 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.


This paper investigates the ordering decisions and coordination mechanism for a distributed short-life-cycle supply chain. The objective is to maximize the whole supply chain's expected profit and meanwhile make the supply chain participants achieve a Pareto improvement. We treat lead time as a controllable variable, thus the demand forecast is dependent on lead time: the shorter lead time, the better forecast. Moreover, optimal decision-making models for lead time and order quantity are formulated and compared in the decentralized and centralized cases. Besides, a three-parameter contract is proposed to coordinate the supply chain and alleviate the double margin in the decentralized scenario. In addition, based on the analysis of the models, we develop an algorithmic procedure to find the optimal ordering decisions. Finally, a numerical example is also presented to illustrate the results.