On coordination under random yield and random demand

This paper analyzes coordination in a supply chain with random yield and random demand (SCRYRD). We study wholesale price, buy-back, revenue share, quantity discount and quantity flexibility contracts. We show that the randomness in the yield does not change the coordination ability of the contracts but affects the values of the contract parameters. In particular, all contracts are shown to coordinate the supply chain under voluntary compliance except the wholesale price contract. We also provide a sensitivity analysis of the optimal policy parameters to the cost and demand parameters.

► We analyze coordination in a supply chain with random yield and random demand.
► We study five well known contracts from the literature.
► All contracts, except the wholesale price contract, are able to coordinate the chain under voluntary compliance.
► We show the effect of yield randomness on the contract parameters.