Balanced three-level supply chain coordination with combined contract under demand uncertainty

Under the consideration of demand uncertainty, salvage value of surplus products and stock-out cost, combined contracts with revenue-sharing and buy-back was used to study the coordination of the three-level supply chain which consists of one retailer, one distributor and one manufacturer. Firstly, establish a three-level supply chain coordinating model with combined contract. Secondly, compare the optimum order quantity of centralized-monitoring-system and that of decentralized-monitoring-system without contracts to coordinate the optimum order quantity of the whole supply chain in the decentralized-monitoring-system with contracts. Thirdly, prove that combined contract can not only coordinate the three-level supply chain well, but also improve the profits of entities in chain evenly. Finally, analyze and test the results in a numerical example.