Mathematical Problems in Engineering
Volume 2012 (2012), Article ID 908408, 19 pages
Research Article

Sales Rebate Contracts in Fashion Supply Chains

1Sun Yat-Sen Business School, Sun Yat-Sen University, Guangzhou 510275, China
2Institute of Textiles and Clothing, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong
3School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China

Received 26 July 2012; Accepted 1 September 2012

Academic Editor: Pui-Sze Chow

Copyright © 2012 Chun-Hung Chiu et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


We explore in this paper the performance of sales rebate contracts in fashion supply chains. We conduct both analytical and numerical analyses via a mean-variance framework with reference to real empirical data. To be specific, we evaluate the expected profits and variance of profits (risk) of the fashion supply chains, fashion retailers, and manufacturers under (1) the currently implemented sales rebate practices, (2) the case without sales rebate, and (3) the theoretical coordination situation (if target sales rebate is adopted). In addition, we analyze how sales effort affects the performances of the supply chain and its agents. Our analysis indicates that the rebate contracts may hurt the retailer and the manufacturer of a fashion supply chain when it is inappropriately set. Moreover, a properly designed sales rebate contract not only can coordinate the supply chain (with retail sales effort) but can also improve expected profits and lower the levels of risk for both the manufacturer and the retailer.