Coordinating Supply Chains in Competitive Environments through Wholesale Price Contracts under Uncertainty

Abstract

The coordination of supply chains is a critical challenge faced by
managers in the competitive market. Addressing this concern becomes
paramount in the context of rivalry between production and distribution
chains. The paper delves into the coordination analysis of a dual
monopoly, where two manufacturers and two retailers collaborate to
distribute goods, with the two products substituting each other. The chains
engage in pricing competition to determine the selling price, and a
wholesale price contract is employed for coordination analysis. The
research demonstrates that supply chain coordination is achieved when
the producer's profit margin is zero, implying that the product's price
offered to the retailer equals the producer's production costs. However,
achieving this balance might be challenging since manufacturers typically
aim for a profit. Consequently, fluctuations in wholesale prices become
instrumental in evaluating the distribution channel's efficiency. The study
further explores the impact of factors such as product substitution and
chain competitiveness on the efficiency of the supply chains.