Coordination of supply chain with a revenue-sharing contract under demand disruptions when retailers compete

This paper investigates how to coordinate a one-manufacturer-two-retailers supply chain with demand disruptions by revenue-sharing contracts. Firstly, we study the coordination of the supply chain without demand disruptions and give the feasible revenue-sharing contracts, which assure the desirability of the chain partners and the legality of selling. Next, we discuss how the supply chain is coordinated under one demand disruption. In the case, we analyze the effects of demand disruptions on the centralized supply chain and derive the coordinating revenue-sharing contracts. We also extend the theoretical results to the case of two demand disruptions. We find that it is harmful for the chain partners to keep the original revenue-sharing contracts without demand disruptions when there are demand disruptions. It is necessary to adjust the original revenue-sharing contracts to demand disruptions. Finally, some numerical examples are given to illustrate the theoretical results. (C) 2012 Elsevier B.V. All rights reserved.