A Study on the Combined Contract of Return Policy and Sales Rebate

Considering the characteristics of uncertain demand, short-life-cycle and long lead time for perishable commodities, the pricing and ordering problems of a decentralized two-echelon supply chain composed of a manufacturer and a retailer is studied. In this supply chain, the manufacturer acts as the leader of the Stackelberg game and makes decisions for benefits of the whole supply chain. A kind of combined contract of return policy and sales rebate that mix the advantages of return policy and sales rebate is suggested. By this combined contract, the manufacturer can promote the retailer to buy more products and encourage the retailer to try his best to sell the products, so it reduces the products returned by the retailer, offers both members more benefits, and optimizes the profit of the whole supply chain. Through this model, the rationality of this combined contract is proved. Numerical examples are given to compare the combined contract of return policy and sales rebate with the return policy. The results show that using the combined contract can more realize coordination and win-win of the supply chain by adjusting the parameters and have sufficient flexibility. In addition, advantages of combined contract of return policy and sales rebate in improving profits for both the whole supply chain and each member are discussed.