Coordination for Product Returns´ Rapid Transportation

In the manufacturer-TPL supply chain, manufacturer outsourced the reverse logistics works to a TPL. The quicker TPL transport the product returns, the less of the invalid returns. Under the simple piece-rate contract, TPL makes the transportation decision to maximize his own expected profit. The equilibrium transportation speed under such contract is slower than the supply chain´s optimal speed. In this paper, we introduce a punishment mechanism into the piece-rate contract, which not only pay for transported returns, but also punish for the invalid returns. We show that this contract can achieve channel coordination and a win-win outcome for both manufacture and TPL.