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Three-Echelon Channel Contract under disruptions

This paper considers coordination issues of a three-echelon supply chain where a distributor wholesales a single product to a retailer who faces a stochastic demand, in turn the distributor is supplied by a manufacturer. Based on a revenue-sharing contract, a general coordination model of the supply chain is proposed. The model is further extended to cover the situation with disruptions incurred by some sudden events. Under both the cost and demand disruptions, the paper presents methods of how the previous contract is adjusted to re-coordinate the channel, and the optimal order policy of the re-coordinated chain. The model is illustrated with numerical examples