Supply Chain Profit Optimization Using Coordinating Contracts

Abstract

In today's rapidly changing economy, and with the interdependence of economic entities, the problem of assessing supply chain financial performance and the ways of improving that performance become acutely relevant. At the same time, any proposed method for increasing supply chain financial performance should improve not only the performance of the whole chain, but also the performance of each individual participant.
The purpose of this work is to study the problem of supply chain integration using contracts, and to allow for the coordination of participants’ activities in order to improve the financial performance of all stakeholders and the supply chain as a whole. As a measure of financial performance, the indicator of profit vis-a-vis the supply chain and its participants is considered.
The article presents the results of an analysis of modern Russian and foreign literature in the field of supply chain coordination using contracts. The study analyses the existing concepts of coordination in the supply chain, and within the framework of external integration of the chain, vertical coordination is considered in detail.
The main result of the work is the formulation of the problem of supply chain integration and approaches to its solution using a contract-based approach. In the research for various types of contracts, the motivation of the participants of the chain for adapting the coordinating contracts is explained, the equations for the expected profit of all stakeholders are presented, and the structure and the typology used in the supply chain contracts and their coordination are classified. 
From a theoretical point of view, the results of this study allow for the formal articulation of the problem of supply chain integration based on the coordination of its individual elements, as well as to unify the expressions for the expected profit of the chain and stakeholders. From a practical point of view, the results of the study may be of interest to companies concerned in maximising the supply chain profit and the profits of its participants, since this article justifies that the increase in profits can be achieved through the external supply chain integration through coordinating contracts.