If the retailer can transfer some of the risks to the manufacturer,the retailer may be willing to increase his order quantity and thus increase both his profit and the manufacturer's profit. Fixed Production Cost =$100,000 Variable Production Cost=$35 Wholesale Price =$80 Selling Price=$125 Salvage Value=$20 Manufacturer Manufaeturer DC Retail DC In the previous strategy,the retailer takes all the risk and the manufacturer takes no risk. Stores This is why the retailer has to be very conservative with the amount he orders
Manufacturer Manufacturer DC Retail DC Stores Fixed Production Cost =$100,000 Variable Production Cost=$35 Selling Price=$125 Salvage Value=$20 Wholesale Price =$80 Supply Contracts In the previous strategy, the retailer takes all the risk and the manufacturer takes no risk. This is why the retailer has to be very conservative with the amount he orders. If the retailer can transfer some of the risks to the manufacturer, the retailer may be willing to increase his order quantity and thus increase both his profit and the manufacturer’s profit
Supply Contracts How dose the manufacturer encourage the retailer to raise order quantity? Buy-back contract The manufacturer repurchases what he has previously sold to the retailer. Revenue sharing contract Under a revenue-sharing contract,a retailer pays a supplier a wholesale price for each unit purchased,plus a percentage of the revenue the retailer generates
Supply Contracts How dose the manufacturer encourage the retailer to raise order quantity? Buy-back contract The manufacturer repurchases what he has previously sold to the retailer. Revenue sharing contract Under a revenue-sharing contract, a retailer pays a supplier a wholesale price for each unit purchased, plus a percentage of the revenue the retailer generates