A supply chain coordination contract with manufacturing cost screening and sales effort incentives. (Chinese. English summary) Zbl 1324.91024

Huang, Meiping; Wang, Xianyu; Zhang, Huan

Oper. Res. Trans. 18, No. 4, 45-57 (2014).

Summary: To solve the low efficiency caused by hiding of the manufacturer’s cost and retailer’s efforts in a two-echelon supply chain, a virtual third party is introduced as a selfless principal based on principal agent theory. Firstly, a supply chain coordination model under adverse selection and moral hazard is developed to screen the manufacturer’s true cost and make retailer work hard. Secondly, the relationship among the coordination contract parameters is obtained. Finally, main results reveal that the coordination contract could incent the manufacturer to tell the truth, and the retailer cooperates with the low-cost manufacturers to carry out the optimal efforts. Furthermore, a numerical example is used to verify the conclusions.

MSC:

91B38	Production theory, theory of the firm
90B06	Transportation, logistics and supply chain management
90B05	Inventory, storage, reservoirs

Keywords:

adverse selection; moral hazard; supply chain coordination; virtual third party