Coordination of a three-level supply chain under disruption using profit sharing and return policy contracts

This paper studies a three-level supply chain with one retailer, one distributer and one manufacturer under disruption. First, we show that profit sharing and return policy contracts established between members can coordinate this supply chain. Then, we investigate the effect of demand disruption in supply chain and we illustrate the possibility of breaking the initial desirable coordination. We consider two possible scenarios for the demand disruption separately; afterwards we define the revised coordinator parameters to respond to their effect in supply chain. Numerical examples for validation and evaluation of our model are also elaborated.