Supply Chain Coordination Contracts with Free Replacement Warranty: A Study on Supply Chain Optimization and Fair Profit Allocation through Contract Design

This study investigates the coordination mechanism for a supply chain from a novel aspect. It looks beyond the conventional supply chain coordination problem by incorporating an optimization dimension of warranty period. It provides the guidelines for designing a contract between a manufacturer and a retailer so that the supply chain¿s performance is optimized, while each party in the chain achieves its maximal pro¿t. The concepts developed here are easy to implement in real world supply chain, and provide valuable insights into more complex types of supply chain contracts.