Coordinating a supply chain for deteriorating items with multi-factor-dependent demand over a finite planning horizon

This study considers a one-manufacturer and one-retailer supply chain for deteriorating items over a finite planning horizon. In the case with multi-factor-dependent demand, we analyze the coordination of the system within a contract mechanism. First, we formulate and then compare a decentralized model and a centralized model. Next, we propose a revenue-sharing contract and a revised revenue-sharing contract to coordinate the decentralized supply chain. We illustrate the proposed models with a numerical example and we perform sensitivity analysis of the coordination results based on several key parameters. The results show that the supply chain's profit in the centralized system increases by at least 13, where both contracts can coordinate the system and the fraction parameter of the revenue exists when each contract is acceptable to both members of the supply chain, and the revised revenue-sharing contract always yields a higher profit than the revenue-sharing contract. Furthermore, the supply chain's profit under the revised revenue-sharing contract is shown to be equivalent to that with the centralized system.