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Mathematical Problems in Engineering
Volume 2016, Article ID 9167864, 10 pages
http://dx.doi.org/10.1155/2016/9167864
Research Article

Coordinating Three-Level Supply Chain under Disruptions Using Revenue-Sharing Contract with Effort Dependent Demand

School of Business Administration, Hohai University, Changzhou 213022, China

Received 27 October 2015; Revised 29 December 2015; Accepted 30 December 2015

Academic Editor: Young Hae Lee

Copyright © 2016 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

Considering that the market demand is stochastic and dependent on effort, this essay shows that the benchmark revenue-sharing contract could not coordinate a three-level supply chain consisting of one manufacturer, one distributor, and one retailer. By assuming that the retailer himself bears the effort cost, coordination is achieved by implementing revenue-sharing contract based on rebate and penalty policy in one transaction or two transactions of three-level supply chain, and the former is a special case of the latter. When the disruptions induce the changes of the market demand, the revenue-sharing contract could not coordinate the supply chain. To deal with the problem, this essay introduces two forms of improved revenue-sharing contracts which have antidisruption ability. The model of improved revenue-sharing contract is optimized when the market demand is in the additive form with effort dependent demand. Formulas are given to calculate the optimal contract parameters. Finally, this essay demonstrates the accuracy of the model of improved revenue-sharing contract with the help of numerical examples.