************************* Special Time/Date ***************************

             Department of Systems Engineering and Engineering Management
                                  The Chinese University of Hong Kong


Title : Effective Contracts in Supply Chains
Speaker : Mr. Stephen Shum
    Massachusetts Institute of Technology
Date : February 5th, 2007 (Monday)
Time : 1:30 p.m. - 2:30 p.m.
Venue : Room 513, MMW Engineering Building
    (Engineering Building Complex Phase 2)



We study two issues in supply chain contracts. First, we study the impact of effort in a supply chain with multiple retailers. The costly effort engaged by a retailer may increase or decrease the demands of other retailers. However, effort is usually not verifiable and hence not contractible. We show that traditional contracts, such as buy back or revenue sharing coordinate only under very restrictive conditions. We propose revenue sharing with fixed target rebate. These contracts are shown to be both coordinating and flexible. Interestingly, similar contracts have been used in the fresh food industry to motivate retailers to promote supplier¨s products.

Second, we study the stability of coordinating contracts in supply chains. We illustrate that, due to competition, not all coordinating contracts are achievable. Thus, we introduce the notion of rational contracts, which reflects the agents ``bargaining power". Using a general framework for coordinating and rational contracts, we analyze two supply chains, a supply chain with multiple suppliers and single retailer, and a supply chain with price-competing retailers and a single supplier. We identify coordinating contracts for each case and characterize the bounds on profit shares for the agents in any rational contracts.



Stephen Shum is a doctoral candidate of Operations Research at Massachusetts Institute of Technology. He is interested in operations and supply chain management, in particular the applications of economics, game theory, mathematical programming and stochastic models to study different issues in supply chains. His current research focuses on the economic and coordination issues in supply chains, including contracting, operations incentives, supply chain cooperation and competition, and the marketing-operations interface. He was recently awarded an honorable mention in the 2006 INFORMS Nicholson Student Paper competition for his paper on coordinating multiple retailers with effort-dependent demand. Before joining MIT, he received Bachelor of Science degrees in Mathematics and Electrical Engineering from University of California, Los Angeles.

************************* ALL ARE WELCOME ************************

Host : Professor Li, Duan
Tel : (852) 2609-8323
Email : dli@se.cuhk.edu.hk
Enquiries : Bolin Ding or Jeffrey Xu Yu
  : Department of Systems Engineering and Engineering Management
Website : http://www.se.cuhk.edu.hk/~seg5810
Email : seg5810@se.cuhk.edu.hk