Analysis of supply contracts from a supplier's perspective

Incentive structure and demand uncertainty may cause supply chains to operate at a low efficiency. Therefore, many supply contracts are employed in practice to improve the performance of supply chains, i.e. to benefit all members involved in the chain. Supply chain contracts provide mechanisms to change the incentive structures of the supply chain members so that their decisions can improve the supply chain efficiency, while also protect their own interests. It is important to understand the impacts of supply contracts and their differences from a supplier's perspective, since it is often the supplier who initiates a supply contract. This paper reports on a comprehensive analysis of supply contracts from a supplier's perspective. Six commonly used supply contracts are analysed and the contract parameters are optimized to maximize the supplier's expected profit with consideration to improve the retailer's profit. This case has not been thoroughly investigated in literature to date. The risk-sharing mechanism and the division of the increased profit between the retailer and supplier for some of the contracts are also investigated in detail.