Contracts Based on Inventory Cost Share for Supply Chain Coordination

This work focus mainly on a specific question: for an adopted contract, what are the decisions to be taken for each company taking into account his own interests, knowing that these decisions influence the behavior of the other company and in consequence the coordination of the chain. This may be also explained using the terms of Cachon (2004) who clearly presents this situation: “Optimal supply chain performance requires the execution of a precise set of actions. Unfortunately, those actions are not always in the best interest of the members in the supply chain, i.e., the supply chain members are primarily concerned with optimizing their own objectives, and that selfserving focus often results in poor performance. However, optimal performance can be achieved if the firms coordinate by contracting on a set of transfer payments such that each firm’s objective becomes aligned with the supply chain’s objective” (pp. 229). On recent years there has been a growing interest on the study of dyadic supply chains. Liu and ABSTRACT