Supply Chain Coordination by Contracts

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Supply Chain Coordination

Supply chain coordination issues have been of great interest to researchers for many years especially since 1990s there has been a surge in research in these topics (Burgess et al. 2006). Different perspectives has been proposed on SCC such as “the order, forecasting, procurement, and information sharing procedures among the members of the supply chain” (Therese M. Flaherty, 1996) and “SCC is concerned with managing dependencies between various supply chain members and the joint efforts of all supply chain members to achieve mutually defined goals” (Arshinder, Arunda Kapur, 2007). According to (Omkar D. Palsule-Desai 2012) a SC is perfectly coordinated when the decisions on optimal quantity to be ordered by retailer under decentralized setting equals that of centralized one and yields non-zero profit to both players.

There exist two common structures for SC management: Centralized or integrated supply chain with the single decision maker and decentralized with a network consists of multiple decision makers having different information and incentives. Evidence exists that centralized structure is the ideal status of the SC when there are more than two decision makers since otherwise the profit would be less than optimal.( Tirole1990, Corbet and tang 1999,corbet et al 2004)

Decentralized decision making gives rise to problems causing sub-optimality: double marginalization (Spengler 1950), high inventory holding costs (Boctor et al. 2004),low response time and flexibility (Iyer and Bergen 1997), opportunism created by bilateral dependent relations (Williamson, 1996), risk and vulnerability (Pfohl et al. 2010) , excess inventory, lead times, lost sales, manufacturing costs, customer retention, and revenue enhancements (Fisher et al. 1994; Lee et al. 1997) and etc.
SC coordination decisions revolve around different topics. For instance, logistics (Stock et al. 2000),

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