Channel coordination in a consignment contract
Document Type
Journal article
Source Publication
European Journal of Operational Research
Publication Date
12-1-2010
Volume
207
Issue
2
First Page
897
Last Page
905
Keywords
Channel coordination, Pricing, Production, Retailing
Abstract
With the emergence of virtual market places, consignment selling has been thriving at an unprecedented pace. It has been shown in the literature that inefficiency exists in a decentralized consignment channel with a single revenue share agreement. In our study, we analyze contracts observed in practice that contain bonus or side payment terms, and examine whether they can promote better coordination between the supplier and the retailer. We found that no multi-tier Bonus system can fully coordinate the consignment channel. However, fine adjustments of bonus parameters can bring the channel close to full coordination. Additionally, we found revenue sharing with side payment contracts not only fully coordinate the channel, but they can also be customized to meet the needs of small, medium and large suppliers for extra retailer services such as warehousing and transportation. Managerial insights on how to design the contracts from the supplier, retailer and channel perspectives are discussed in the paper.
DOI
10.1016/j.ejor.2010.05.027
Print ISSN
03772217
E-ISSN
18726860
Publisher Statement
Copyright © 2010 Elsevier B.V.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Zhang, D., De Matta, R., & Lowe, T. J. (2010). Channel coordination in a consignment contract. European Journal of Operational Research, 207(2), 897-905. doi: 10.1016/j.ejor.2010.05.027