Collaboration with joint supply contracts in a two-stage textile-apparel supply chain

Textile and apparel industries are a typical seasonal business involving unpredictable variation in market. In order to get survived, forming supply chain and utilizing the emerged technology to establish a coordinated system become as an important common practice for enterprises in terms of cost reduction and efficiency improvement. Fundamental to this coordination is the management of the incentives of disparate supply chain participants including fabric suppliers, garments manufacturers, and apparel retailers, and others. This paper presents how contractual agreements between firms can impact their ability to efficiently coordinate operational decisions. A collaboration mechanism in a two-stage textile-apparel supply chain was discussed with two kinds of contracts: revenue sharing contracts and buy back contracts. The fabric supplier and the manufacturer enter a revenue sharing contract, and the retailer and manufacturer adopts the buy back contracts. Under the revenue sharing, the manufacturer shares a portion of the selling price to the supplier in return for a lower wholesale price. Under the buy-back contract, the garment manufacturer agrees to buy back unsold goods from the retailer for some agree-upon price.