Supply Contracts
Yossi Sheffi
ESD.260
Logistics Systems
November 9
th
, 2006
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(c) Yossi Sheffi, MIT
2
Outline
Supply contracts
Wholesale contracts
Buyback contracts
Revenue sharing contracts
Option contracts
(c) Yossi Sheffi, MIT
3
The Scenario:
A contract is negotiated
The retailer places order (a single period)
The supplier makes and sends the stuff
The selling season takes place
Accounting (sales, salvage, etc.)
Supplier
Retailer
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Consumer Demand
Demand Density at Retail Level
0
2
4
6
8
10
12
14
16
400
500
600
700
800
900
1,000
1,100
1,200
1,300
Actual Demand
Probability
Bin
Freq.
400
0
500
2
600
5
700
11
800
15
900
10
1,000
5
1,100
3
1,200
1
1,300
0
Average: 811.54
Std Dev: 154.23