Coordination and competition in two-echelon supply chain using grey revenue-sharing contracts

Purpose - This study examines the potential of contracts as one of the supply chain coordination mechanisms under competitive conditions. It also investigates a two-echelon supply chain model with two manufacturers and two retailers to develop a competitive structure in grey stochastic demand. Design/methodology/approach - Supply chain demand is considered as a stochastic phenomenon depending on the selling price of the product. Also, products can be replaced by market manufacturers. Each retailer faces the pricing of products from two manufacturers, leading to competition between downstream retailers. In the present study, the duopoly supply chain model was presented based on the wholesale price contract, revenue-sharing contract and quantity discount contract separately. Findings - Grey optimization and analysis of their coordination were presented. The results showed the high performance of revenue-sharing contracts in the supply chain. Thus, manufacturers will give the next priority to quantity discount contracts. Originality/value - Ordering is the main factor contributing to competitive decision-making. Meanwhile, decision-making along with ordering and pricing will be required due to the nature of the demand.

Automated summary

This study explores the potential of contracts as a supply chain coordination mechanism in competitive environments and presents a duopoly supply chain model under grey stochastic demand. Through grey optimization and coordination analysis, it was found that revenue-sharing contracts performed well in the supply chain, with manufacturers prioritizing quantity discount contracts. Ordering is a crucial factor in competitive decision-making, and decisions on ordering and pricing are necessary due to the nature of demand.