Table 1. Outline of coordination schemes...

Table 1.

Outline of coordination schemes

Contracts	Producer		Retailer		Supply chain
Contracts	Advantage	Disadvantage	Advantage	Disadvantage	Advantage	Disadvantage
Case 0 (No coordination)	Facing lowest risk	Low order quantity from the retailer side	High profit margin	High risk	Virtually, there is no overall advantage supply chain (SC)	Expected demand for the product decreases
	Free to set the wholesale price of the product to maximize own profit	High inventory carrying cost	Free to set a retail price to maximize own profit	Low product demand due to high price		Low supply chain profit
	High profit margin					High product cost
Case 1 (Whole sale price contracts)	Low risk	Low or zero profit	Capture maximum profit share of the SC	High risk	Profit increases	Both members of SC did not benefit equally, so the SC was not coordinated
	High order quantity from the retailer		Can able to order a greater number of units of the product	Inventory carrying cost increases	Efficiency of the SC increases
					Double marginalization reduces
Case 2 (Buy back contracts)	Profit increases	Risk sharing increase	Reduces risk of overstocking	Inventory carrying cost increases	Profit increases/overall cost reduction	Win-win situation is not achievable
	Order quantity increases		Increases salvage value per unit in the form of payback		Product availability increases	May increase the retail price
			Increases the level of product availability		Better coordination between producer and retailer
Case 3 (Revenue Sharing Contracts)	Profit increases	Problem to decide the percentage of profit sharing	Lower wholesale price	Inventory carrying cost increases	Profit increases/overall cost reduction	Win-win situation is not achievable
	Encourages retailer to order larger quantities	Applicability is limited to high value products	Profit increases	Due to the high cost of the product order quantity is less	Better coordination between producer and retailer
	More space for negotiation		Increases the level of product availability
			Lower risk sharing
Case 4 (Markdown money policy)	Significant percentage increase in earnings	Require more careful deliberation	Net income increases	Inventory carrying cost increases	Profit increases/overall cost reduction	More complicated than wholesale price contract
	Encourages retailer to order larger quantities		Increases the degree of product accessibility	High risk sharing	Simplicity and ease of implementation
	Can use preannounce d markdown pricing to sell finite amount of product				Significant effect on pushing order quantity up
Case 5 (Sale rebate contracts)	Net income increases	Due to rebate net income may decrease	Ordering cost reduces	To avoid significant markdown under stocking may be set up	Better marketing of merchandise	Win-win situation is not manageable
	This reduces the risk factors		Net income increases	The high sales effort to receive a sales rebate	Enhance the supply chain performance
	Encourages retailer to order larger quantities		Increases the level of product availability
	Push retailer to sell a greater number of units		Lower risk

Contracts	Producer		Retailer		Supply chain
Contracts	Advantage	Disadvantage	Advantage	Disadvantage	Advantage	Disadvantage
Case 0 (No coordination)	Facing lowest risk	Low order quantity from the retailer side	High profit margin	High risk	Virtually, there is no overall advantage supply chain (SC)	Expected demand for the product decreases
	Free to set the wholesale price of the product to maximize own profit	High inventory carrying cost	Free to set a retail price to maximize own profit	Low product demand due to high price		Low supply chain profit
	High profit margin					High product cost
Case 1 (Whole sale price contracts)	Low risk	Low or zero profit	Capture maximum profit share of the SC	High risk	Profit increases	Both members of SC did not benefit equally, so the SC was not coordinated
	High order quantity from the retailer		Can able to order a greater number of units of the product	Inventory carrying cost increases	Efficiency of the SC increases
					Double marginalization reduces
Case 2 (Buy back contracts)	Profit increases	Risk sharing increase	Reduces risk of overstocking	Inventory carrying cost increases	Profit increases/overall cost reduction	Win-win situation is not achievable
	Order quantity increases		Increases salvage value per unit in the form of payback		Product availability increases	May increase the retail price
			Increases the level of product availability		Better coordination between producer and retailer
Case 3 (Revenue Sharing Contracts)	Profit increases	Problem to decide the percentage of profit sharing	Lower wholesale price	Inventory carrying cost increases	Profit increases/overall cost reduction	Win-win situation is not achievable
	Encourages retailer to order larger quantities	Applicability is limited to high value products	Profit increases	Due to the high cost of the product order quantity is less	Better coordination between producer and retailer
	More space for negotiation		Increases the level of product availability
			Lower risk sharing
Case 4 (Markdown money policy)	Significant percentage increase in earnings	Require more careful deliberation	Net income increases	Inventory carrying cost increases	Profit increases/overall cost reduction	More complicated than wholesale price contract
	Encourages retailer to order larger quantities		Increases the degree of product accessibility	High risk sharing	Simplicity and ease of implementation
	Can use preannounce d markdown pricing to sell finite amount of product				Significant effect on pushing order quantity up
Case 5 (Sale rebate contracts)	Net income increases	Due to rebate net income may decrease	Ordering cost reduces	To avoid significant markdown under stocking may be set up	Better marketing of merchandise	Win-win situation is not manageable
	This reduces the risk factors		Net income increases	The high sales effort to receive a sales rebate	Enhance the supply chain performance
	Encourages retailer to order larger quantities		Increases the level of product availability
	Push retailer to sell a greater number of units		Lower risk

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