Study on joint contract of return policy and sales rebate based on two-level supply chain

With acceleration of technological renovation, fierce demand of consumer personality and combination of product´s functionality and creativity, the commodities owning characteristics of short life-time and uncertain demand increase suddenly. In order to sell this kind of commodity, the manufacturer commonly adopts contract system of supply chain to distribute sales risk with the retailers and meanwhile stimulates the retailers to increase ordering quantity to achieve supply chain coordination. In this paper, we suppose that the manufacturer is leader and the retailer is follower in supply chain system. Considering the influence of price on demand, we discuss how the manufacturer uses return policy and sales-rebates contract to affect the ordering of the retailers. A model under the condition of return policy and sales-rebates contract is built based on a basic model. Finally, this paper carried out numerical analysis to the model and performed sensitive analysis on critical parameters using mathematics as software. The result indicated that the supply chain was optimized by using returns policy and sales-rebates contact.