Efficient Supply Contracts for Fashion Goods with Forecast Updating and Two Production Modes

Karen L. Donohue ()
Additional contact information
Karen L. Donohue: Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455

Management Science, 2000, vol. 46, issue 11, 1397-1411

Abstract: We examine the problem of developing supply contracts that encourage proper coordination of forecast information and production decisions between a manufacturer and distributor of high fashion, seasonal products operating in a two-mode production environment. The first production mode is relatively cheap but requires a long lead time while the second is expensive but offers quick turnaround. We focus on contracts of the form (w 1 , w 2 , b) where w i is the wholesale price offered for production mode i and b is a return price offered for items left over at the end of the season. We find that such a contract can coordinate the manufacturer and distributor to act in the best interest of the channel. The pricing conditions needed to ensure an efficient solution vary depending on the degree of demand forecast improvement between periods and the manufacturer's access to forecast information. We also examine whether these conditions ensure a Pareto optimal solution with respect to two traditional production settings.

Keywords: supply contracts; coordination; production planning; return option; value of information (search for similar items in EconPapers)
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (164)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.46.11.1397.12088 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:46:y:2000:i:11:p:1397-1411

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().