Skip to main content
SpringerLink
Log in

A coordination theoretic model for three level supply chains using contracts

  • Published:
Sadhana Aims and scope Submit manuscript

Abstract

Typically, supply chain members are dependent on each other to manage various resources and information. The conflicting objectives and lack of coordination between supply chain members may often cause uncertainties in supply and demand. The basic elements of coordination theory like interdependency, coherency and mutuality may help in effective flow of information and material between the dependent supply chain members. Supply chain contract can be an effective coordination mechanism to motivate all the members to be a part of the entire supply chain. There are different types of supply chain contracts such as buy back and quantity flexibility contracts. Supply chain performance may be substantially improved by properly designing the contracts to share risks and rewards. The objective of this paper is to explore the applicability of coordination elements through an analytical model in three-level (Manufacturer-distributor-retailer) serial supply chains using contracts. The model evaluates the impact of supply chain contracts on various performance measures. The impact of some contract may be on some specific performance measure only, which helps managers to choose the type of contract if there is an objective of improving certain performance measure before hand. In three-level supply chains, the contracts are designed at two distinct interfaces: Manufacturer-distributor and distributor-retailer. The model demonstrates the complexity in evaluating the decision variables of three level supply chains. The proposed model is a novel approach to apply coordination theory at various levels of supply chain. The model also presents how the coordination elements are related to each other in various coordination cases.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Arshinder, Kanda A, Deshmukh S G 2006 Coordination based perspective on the procurement process in supply chain. Int. J. Value Chain Management 1: 117–138

    Article  Google Scholar 

  • Arshinder, Kanda A, Deshmukh S G 2007 Supply chain coordination issues: A SAP-LAP framework. Asia Pacific Journal of Marketing and Logistics 9: 240–264

    Article  Google Scholar 

  • Arshinder, Kanda A, Deshmukh S G 2008 Supply chain coordination: Perspectives, empirical studies and research directions. Int. J. Production Econo. 115: 316–335

    Article  Google Scholar 

  • Arshinder, Kanda A, Deshmukh S G 2009 A framework for evaluation of coordination by contracts: A case of two-level supply chains. Computers and Industrial Eng. 56: 1177–1191

    Article  Google Scholar 

  • Atkinson A A 1979 Incentives, uncertainty, and risk in news-boy problem. Decision Science 10: 341–353

    Article  Google Scholar 

  • Barbarosoglu G 2000 An integrated supplier-buyer model for improving supply chain coordination. Production Planning and Control 11: 732–741

    Article  Google Scholar 

  • Barnes-Schuster D, Bassok Y, Anupindi R 2002 Coordination and flexibility in supply contracts with options. Manufacturing and Service Operations Management 4: 171–207

    Article  Google Scholar 

  • Bose I, Anand P 2007 On returns policies with exogenous price. European J. Operational Res. 178: 782–788

    Article  MATH  MathSciNet  Google Scholar 

  • Cachon G P 2004 Supply chain coordination with contracts, In S Graves, T de Kok (eds.), Handbooks in Operations Research and Management Science. North Holland Press

  • Cachon G P, Lariviere M A 2005 Supply chain coordination with revenue sharing contracts: strengths and limitations. Management Science 51: 30–44

    Article  Google Scholar 

  • Campbell A J 1997 What affects expectations of mutuality in business relationships? J. Marketing Theory and Practice 5: 1–11

    Google Scholar 

  • Chaib-Draa B, Moulin B, Mandiau R, Millot P 2004 Trends in distributed artificial intelligence. Artificial Intelligence Rev. 6: 35–66

    Article  Google Scholar 

  • Chaudhary A, Deng P, Rathnam S 1996 A computational model of coordination. IEEE Transactions On Systems Man and Cybernetics — Part A: Systems and Humans 26: 132–141

    Article  Google Scholar 

  • Chauhan S S, Proth J M 2005 Analysis of a supply chain partnership with revenue sharing. Int. J. Production Economics 97: 44–51

    Article  Google Scholar 

  • Chen H, Chen J, Chen Y F 2006 A coordination mechanism for a supply chain with demand information updating. Int. J. Production Economics 103: 347–361

    Article  Google Scholar 

  • Emmons H, Gilbert S M 1998 Note. The role of returns policies in pricing and inventory decisions for catalogue goods. Management Science 44: 276–283

    Article  MATH  Google Scholar 

  • Giannoccaro I, Pontrandolfo P 2004 Supply chain coordination by revenue sharing contracts. Int. J. Production Economics 89: 131–139

    Article  Google Scholar 

  • He J, Chin K S, Yang J B, Zhu D L 2006 Return policy model of supply chain management for single-period products. J. Optimization Theory and Applications 129: 293–308

    Article  MATH  MathSciNet  Google Scholar 

  • Kaur A, Kanda A, Deshmukh S G 2006 A graph theoretic approach for supply chain coordination. Int. J. Logistics and System Management 2: 321–341

    Google Scholar 

  • Kim T, Hong Y, Lee J 2005 Joint economic production allocation and ordering policies in a supply chain consisting of multiple plants and a single retailer. Int. J. Production Res. 17: 3619–3632

    Article  Google Scholar 

  • Koulamas C 2006 A newsvendor problem with revenue sharing and channel coordination. Decision Sciences 37: 91–100

    Article  Google Scholar 

  • Krishnan H, Kapuscinski R, Butz D A 2004 Coordinating contracts for decentralized supply chains with retailer promotional effort. Management Science 50: 48–63

    Article  Google Scholar 

  • Lee C H, Rhee B D 2007 Channel coordination using product returns for a supply chain with stochastic salvage capacity. European J. Operational Res. 177: 214–238

    Article  MATH  Google Scholar 

  • Malone T, Crowston K 1994 The interdisciplinary study of coordination. ACM Computing Surveys 26: 87–119

    Article  Google Scholar 

  • McCann J E, Ferry D L 1979 An approach for assessing and managing interunit interdependence Academy of Management Rev. 4: 113–119

    Article  Google Scholar 

  • Milner J M, Rosenblatt M J 2002 Flexible supply contracts for short life cycle goods: The buyer’s perspective. Naval Research Logistics 49: 25–45

    Article  MATH  MathSciNet  Google Scholar 

  • Mintzberg H 1979 The structuring of organizations. Englewood Cliffs, Prentice Hall

    Google Scholar 

  • Nahmias S, Smith S A 1994 Optimizing inventory levels in a two-echelon retailer system with partial lost sales. Management Science 40: 582–596

    Article  MATH  Google Scholar 

  • Padmanabhan V, Png I P L 1997 Manufacturer’s returns policies and retail competition. Marketing Science 16: 81–94

    Article  Google Scholar 

  • Pasternack B A 1985 Optimal pricing and return policies for perishable commodities. Marketing Science 4: 166–176

    Article  Google Scholar 

  • Rubin P A, Benton W C 2003 A generalized framework for quantity discount pricing schedules. Decision Sciences 34: 173–188

    Article  Google Scholar 

  • Sethi S P, Yan H, Zhang H 2004 Quantity flexibility contracts: optimal decisions with information updates. Decision Sciences 35: 691–712

    Article  Google Scholar 

  • Simatupang T M, Wright A C, Sridharan R 2002 The knowledge of coordination for supply chain integration. Business Process Management Journal 8: 289–308

    Article  Google Scholar 

  • Terzi S, Cavalieri S 2004 Simulation in the supply chain context: A survey. Computer in Industry 53: 3–16

    Article  Google Scholar 

  • Tsay A A, Lovejoy W S 1999 Quantity flexibility contracts and supply chain performance. Manufacturing and Service Operations Management 1: 89–111

    Article  Google Scholar 

  • Weng Z K 2004 Coordinating order quantities between the manufacturer and the buyer: A generalized newsvendor model. European J. Operational Res. 156: 148–161

    Article  MATH  MathSciNet  Google Scholar 

  • Whang S 1995 Coordination in operations: taxonomy. J. Operations Management 12: 413–422

    Article  Google Scholar 

  • Yang S, Yang J, Abdel Malek L 2007 Sourcing with random yields and stochastic demand:Anewsvendor approach. Computers and Operations Research 34: 3682–3690

    Article  MATH  Google Scholar 

  • Yao D, Yue X, Wang X, Liu J J 2005 The impact of information sharing on a returns policy with the addition of a direct channel. Int. J. Production Economics 97: 196–209

    Article  Google Scholar 

  • Yao Z, Leung S C H, Lai K K 2008 Manufacturer’s revenue sharing contract and retail competition. European J. Operational Res. 186: 637–651

    Article  MATH  MathSciNet  Google Scholar 

  • Yue X, Raghunathan S 2007 The impacts of the full returns policy on a supply chain with information asymmetry. European J. Operational Res. 180: 630–647

    Article  MATH  Google Scholar 

  • Zou X, Pokharel S, Piplani R 2008 A two-period supply contract model for a decentralized assembly system. European J. Operational Res. 187: 257–274

    Article  MATH  MathSciNet  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management Studies, Indian Institute of Technology Madras, Chennai, 600 036, India

    Arshinder

  2. Department of Mechanical Engineering, Indian Institute of Technology Delhi, New Delhi, 110 016, India

    Arun Kanda & S. G. Deshmukh

Authors
  1. Arshinder
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Arun Kanda
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. S. G. Deshmukh
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to S. G. Deshmukh.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Arshinder, Kanda, A. & Deshmukh, S.G. A coordination theoretic model for three level supply chains using contracts. Sadhana 34, 767–798 (2009). https://doi.org/10.1007/s12046-009-0045-6

Download citation

  • Received:

  • Revised:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12046-009-0045-6

Keywords

Search

Navigation