• Alejandra Gomez-Padilla University of Guadalajara
  • Tsutomu Mishina Akita Prefectural University
Keywords: Supply chain, contracts, rebate, option


The objective of this document is to compare the performance of the companies forming a dyadic supply chain, and for the chain as a single unit, under two types of contracts: option and rebate. The performance is measured in economic terms (benefits and costs) and in physical units (inventory held and unsatisfied demand). The results will help to identify which is the better contract for a given set of parameters. Under an option contract, the retailer orders a quantity of units and has a right to modify his order (increase or decrease) by buying the option premium in advance from the supplier. Under a rebate contract, the supplier offers a rebate for the units ordered over a certain number of units previously fixed.  With an option contract, the retailer reserves a number of units from the supplier and, after receiving more information about demand, he will pass his final order. With a rebate contract, the retailer will decide from the beginning the number of units to order knowing the rebate condition (price and quantity). First the theoretical bases are introduced for each contract, next both models are compared by simulation. The simulation plan is presented and the results are discussed.

Author Biography

Alejandra Gomez-Padilla, University of Guadalajara
Alejandra Gomez_Padilla is an associate professor at the Department of Industrial Engineering at the Center of Exact Sciences and Engineering of University of Guadalajara, in Mexico.  She pursued her undergraduate studies on industrial engineer in Mexico and holds a master´s degree from the École Polytechnique de Montréal (Polytechnic School of Montreal). She obtained a doctorate degree on industrial engineering at the National Polytechnic Institute of Grenoble, in France. Before joining academia, she worked for IBM Mexico Site as Production and Product Engineer. Her research interests are in areas of logistics, optimization and supply chain modeling, specifically models that include contracts.
How to Cite
Gomez-Padilla, A., & Mishina, T. (2011). COMPARISON OF THE PERFORMANCE OF A SUPPLY CHAIN UNDER REBATE AND OPTION CONTRACTS. Brazilian Journal of Operations & Production Management, 8, 51-65. Retrieved from