Multi-period Supply Chain Coordination for A Newsboy Problem under Consignment Contract with Revenue Sharing

A particular Vendor Managed Inventory (VMI) policy, known as consignment contract, is a popular inventory management method which the vendor retains ownership of inventory and gets paid from the retailer based on actual products sold. This work considered a supply chain with a manufacturer and a retailer where a particular product with a short life cycle or selling season is produced and sold. Additionally, a selling season consists of multiple ordering cycles; the product can be replenished once during each cycle. This work extended the traditional newsboy problem to a multi-period model and formulated the profit models of the manufacturer, retailer, and whole channel under a consignment contract. A revenue-sharing policy was proposed, which leads to Pareto improvements among the channel members. Numerical simulations were conducted to demonstrate the analytical results for the replenishing quantity, selling price and expected profits of the manufacturer, retailer, and whole channel under the channel coordination.