Supply Chain Coordination with Contracts1
Gérard P.Cachon
1321Steinberg Hall/Dietrich Hall
The Wharton School of Business¢University of Pennsylvania
bomberPhiladelphia¢PA¢19104
cachon@wharton.upenn.edu¢opim.wharton.upenn.edu/~cachon
September2001
1st draft
百度英译汉1This paper is an invited chapter to be published in the Handbooks in Operations Rearch and Management Science:Supply Chain Management,edited by Steve Graves and Ton de Kok and published by North-Holland.Feedback is quite welcomed.
1Introduction
Each…rm in a supply chain must execute a preci t of actions to achieve optimal supply chain performance.But each…rm’s primary objective is its own pro…t.As a result,supply chain excellence requires the coordination of disparate incentives.
This chapter reviews and extends the literature on the management of incentive con‡icts within a supply chain.Numerous supply chain models are discusd,roughly prented in order of increasing complexity.In each model the supply chain optimal actions are identi…ed.In each ca the…rms could implement tho ,each…rm has access to the information needed to determine the optimal actions and the optimal actions are feasible for each…rm.2However,…rms lack an incentive to implement tho actions.To create that incentive the…rms can adjust their terms of trade via a contract that establishes a transfer payment scheme.A number of di¤erent contract types are identi…ed and their bene…ts and drawbacks are illustrated.
The…rst model has a single supplier lling to a single retailer that faces the newsvendor problem.In that model the retailer orders a single product from the supplier well in advance of a lling ason with stochastic demand.The supplier produces after receiving the retailer’s order and delivers her production to the retailer at the start of the lling ason.3The retailer has no additional replenishment opportunity.How much the retailer choos to stock clearly depends on the contract th
e supplier o¤ers.
中英文翻译The newsvendor model is not complex,but it is su¢ciently rich to study three main questions in supply chain coordination.First,which contracts coordinate the supply chain?
firmament
A contract is said to coordinate the supply chain if the t of supply chain optimal actions is a Nash ,no…rm has a pro…table unilateral deviation from the t of supply chain optimal actions.Ideally,the optimal actions should also be a unique Nash equilibrium, otherwi the…rms may“coordinate”on a sub-optimal t of actions.In the newsvendor model the actions to coordinate are the retailer’s order quantity and the supplier’s production quantity.Second,which contracts have su¢cient‡exibility(by adjusting parameters)to
2Even in the asymmetric information models there is an assumption that the…rms can share information so that all…rms are able to evaluate the optimal policies.Nevertheless,…rms are not required to share information.
See Anand and Mendelson(1997)for a model in which…rms are unable to share information even though they have the incentive to do so.
3Following Marty Lariviere’s convention,the…rm o¤ering the contract is considered female and the accepting …rm is male.When neither…rm o¤ers the contract,then the upstream…rm is female,and the downstream …rm is male.
allow for any division of the supply chain’s pro…t among the…rms?If a coordinating contract can allocate rents arbitrarily,then there always exists a contract that Pareto dominates a non-coordinating ,each…rm’s pro…t is no wor o¤and at least one…rm is strictly better o¤with the coordinating contract.Third,which contracts are worth adopting? Although coordination and‡exible rent allocation are desirable features,contracts with tho properties tend to be costly to administer.As a result,the contract designer may actually prefer to o¤er a simple contract even if that contract does not optimize the supply chain’s performance.A simple contract is particularly desirable if the contract’s e¢ciency is high(the ratio of supply chain pro…t with the contract to the supply chain’s optimal pro…t) and if the contract designer captures the lion’s share of supply chain pro…t.
§3provides the…rst extension to the newsvendor model.Now the retailer choos his retail price in addition to his stocking quantity.It is shown that many of the contracts that coordinate the basic newsvendor model no longer coordinate in this tting.However, some contracts are robust to this change.Furthermore,tho contracts coordinate the supply chain even though they place no restricti
on on the retailer’s pricing decision,which is important since in general suppliers are legally prohibited from dictating the prices their retailers may charge.
The cond extension to the newsvendor model,§4,expands the retailer’s action t by allowing the retailer to exert costly e¤ort to increa demand.Like the retail price,the retialer’s e¤ort is ,the supplier cannot restrict the retailer to a limited t of e¤ort levels.In this model there is a strong tension between the supplier and the retailer:since the cost of e¤ort is borne exclusively by the retailer,the supplier always prefers the retailer to exert more e¤ort.Nevertheless,coordinating contracts do exist for this tting.
indeed是什么意思In the third extension the supplier lls to multiple competing retailers,§5.In this tting supply chain coordination no longer requires“more”from the retailers.To explain,for coordination in the single newsvendor model the retailer must order more inventory and in the…rst two extensions of that model the retailer must generate more demand by either cutting his price or by increasing his e¤ort.But retail competition can lead to too much inventory or prices that are too low becau each retailer fails to account for how his action reduces the pro…ts of the other retailers.As a result,supply chain coordination ironically
requires that the supplier temper the retailers’competitive tendencies.To be speci…c,two models of retail competition are considered.In the…rst model retailers compete via their inventory quantity:there is a…xed retail price but a retailer’s share of total demand is proportional to his inventory level.In that ca the supplier can temper competition by increasing his wholesale price.Indeed,with multiple retailers the supplier can achieve with just a wholesale price contract something that cannot be achieved with just one retailer:earn a positive pro…t and coordinate the supply chain.Nevertheless,the supplier can always do even better with a more sophisticated contract.However,the incremental improvement a¤orded by the more sophisticated contract decreas as retail competition increas.In the cond model the retailers compete via price:there exists a market clearing price that depends on the retailers’total inventory.The retailers now order too little inventory becau they anticipate bruising price competition.Hence,the supplier can temper competition either by tting a minimum price level or by allowing the retailers to return inventory.
In§6the retailer faces a newsvendor problem with two replenishment opportunities.The …rst opportunity is the traditional ,it occurs well in advance of the lling ason. The cond one occurs just before the lling ason,after the retailer receives an improved demand forecast.Since the retailer’s demand information improves with time,there is cer-tainly a bene…t for the supply chai
salonn to delay production or capacity decisions until after the improved forecast is received.But late production is more expensive than early production. Hence,the supply chain must balance the retailer’s preference for delayed commitments with the supplier’s preference for earlier commitments.
§7studies an in…nite horizon stochastic demand model in which the retailer receives replenishments from a supplier after a constant lead time.The retailer manages his inventory with a ba stock policy.For tractability,demands are ,there are no lost sales,so the retailer’s action does not impact the supply chain’s revenue.Hence,the…rms ek to minimize cost.The retailer’s costs are traditional:an inventory holding cost and a backorder penalty cost.The supplier incurs a backorder penalty for retail backorders which re‡ects the supplier’s desire to maintain adequate availability of her product to consumers. The supplier may have that preference to protect her investment in her brand equity or to prevent customers from trying competing products.Like the newsvendor model with e¤ort, the supplier also prefers more from the retailer in this ,a higher ba stock level
which leads to more inventory.In addition,the retailer bears the full burden of additional inventory in the form of inventory carrying costs.However,unlike the e¤ort model,it is assumed the…rms can cont
ract on the retailer’s ,the supplier can verify how much inventory the retailer has and provide transfer payments bad on the retailer’s holding cost.
§8adds richness to the single location ba stock model by making the supplier hold inventory,albeit at a lower holding cost than the retailer.In this two echelon rial supply chain the supplier receives replenishments after a constant lead time from a source with in…nite capacity.The supplier continues to replenish the retailer and there is still a…xed amount of time between the dispatch of a shipment and its arrival at the retailer.But the dispatch of a shipment is delayed whenever there is an inventory shortage at the supplier.劝说英语
我最亲爱的英文
In the single location model the only critical issue is the amount of inventory in the supply chain.In this model the allocation of the supply chain’s inventory between the supplier and the retailer is important as well.For a…xed amount of supply chain inventory the supplier always prefers that more is allocated to the retailer,becau that lowers both her inventory and backorder costs.(Recall that the supplier is charged for retail backorders.)On the other hand,the retailer’s preference is not so clear:less retail inventory means lower holding costs, but also higher backorder costs.There are also subtle interactions with respect to the total amount of inventory in the supply chain.The retailer is biad to carry too little inventory: the retailer bears the full cost of his inventory but only receives a p韩国高丽大学
ortion of the bene…, he does not bene…t from the reduction in the supplier’s backorder cost).On the other hand, there is no clear bias for the supplier:while the supplier bears the cost of his inventory and does not bene…t from the reduction in the retailer’s backorder cost,which bias the supplier to carry too little inventory,the supplier does not bear the cost of the retailer’s inventory (which increas along with the supplier’s inventory),which bias the supplier to carry too much inventory.Either bias can dominate,depending on the parameters of the model.
§9departs from the assumption that…rms agree to contracts with t transfer prices. In many supply chains the…rms agree to a contractual arrangement before the realization of some relevant information.The…rms could specify transfer payments for every possible contingency,but tho contracts are quite complex.Instead,…rms could agree to t transfer prices via an internal market after the revelant information is revealed.ifo
