Supply Contracts

Introduction

A supply chain contract runs between the buyer and the supplier. To make a supply chain contract successful the coordination among all the actors plays prominent role in the supply chain management. In SCM the control may be centralized or decentralized. In a centralized system the decision making is done by a unique individual who has the entire information of the supply chain where as in the decentralized system different actors has to make decisions at different stages of supply chain. So I feel that there is a great scope for achieving higher efficiency in centralized system than decentralized because all the actors may not be fine decision makers.

Some how Centralized system is not realistic, so we have to choose the decentralized system. Supply chain coordination some into SCM in this issue due to the decision making requirements in SC contracts. The intended contract should achieve more profit than the SC without contract. The main intentions to be achieved by the SC contracts are as follows:

* Risk Sharing

* Profit Maximization

We have different supply chain contracts like Quantity flexibility contracts, Buy back contracts, Revenue sharing contracts, sales rebates, discounts, incentives mechanisms. Here I would like to consider the revenue sharing contracts because there is a chance of getting higher profit sharing in this kind of contracts.

Motivation

In every supply chain management, the focus of the actors will be in increasing sales and maximizing profits among the competitors. The goal of the manufacture is to meet the demand of the end customers. Supply contract is an agreement between the seller and buyer. Contracts may be between manufacturer, wholesaler, retailer, distributor and buyer. It is a document that covers the information regarding the supply goods between two businesses. It has the details regarding revenue earned, costs, time details and responsibilities needed. Supply contracts help in maintaining good...