Study on Supply Chain Coordination under Buy-back Contract and Markdown Money Contract

The distribution-channel coordination problem of a fashion commodity was studied. There are costs of handling overstock, so the supply chain members´ comparative liquidation advantages are different and the desirable contracts are different accordingly The conditions under which either buy-back contracts or markdown allowance contracts will be more desirable were determined in a two-echelon supply chain, i.e., single manufacturer and single retailer, model. The result shows that properly designed contracts can not only coordinate supply chain but also allocate the revenue arbitrarily by adjusting the parameters and have sufficient flexibility. Coordinating contracts are practical given that they achieve the win-win between the members. The result was confirmed by a numerable example