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Promotional coordination mechanisms with demand dependent on price and sales efforts

ABSTRACT This paper deals with a channel coordination problem of three-level supply chain comprising of manufacturer, distributor, and retailer while demand is sensitive with price and sales efforts of channel members. The upstream members of the chain offer service level assurance/agreement (SLA), in which fair price, quality assurance, rebate on price, timely delivery, customers’ feedback, are included to the respective downstream members at time of selling their products. In this model, six different types of rebate and sales effort mentioned in SLA are proposed to coordinate the channel. A mathematical model is formulated to quantify the profits of individual members and it is analyzed mathematically as well as numerically to identify the preference of each channel member among proposed contracts. Moreover, an analytical condition is derived to measure the hesitancy the retailer whether he/she would participate in sells effort sharing contract with the manufacturer or the distributor.