Design and performance analysis of dynamic supply chain contracts

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The business practices have changed dramatically in recent years, due to increased product variety resulting from manufacturing technology advancements, outsourcing as a result of information and transportation technology advancements, and more knowledgeable customers. The focus of competition has now shifted from the level of integrated supply chains to that of decentralized and independent firms collaborating with each other. Corresponding to this trend, we define the business characteristics of a product as price elasticity, supply uncertainty and demand uncertainty and the business characteristics of a market as the interaction of one business organization with other business organizations, i.e., decentralization, and its competition with other competitors. Some of these business characteristics are changing over the concerned planning horizon. On the other hand, most supply chain contracts are implemented under the assumption of constant business characteristics. If some business characteristics are changing, then the concerned planning horizon will be segmented into a number of "independent" stages. The selected supply chain contract is applied in each stage and the contract parameters need to be adjusted according to the business environment at that stage. The drawbacks of this approach are (1) "oversimplified" interaction between different stages and (2) ignoring the value of historical data in contract selection. To the best of my knowledge, no explicit attempt to address all business characteristics simultaneously in a changing environment has yet been undertaken. This research program is precisely to accomplish this. First, I plan to investigate the performance of any given common supply chain contract by taking both product and market business characteristics into consideration under a changing environment. Then, based on the performance anayisis, managerial insights will be provided to match business characteristics with features required in supply chain contracts to guide the design of supply chain contracts. Most industries (particularly retail industry) are looking forward to seeing significant progress in this area.