Altruistic Behavior in Supply Chain Management

Supply chain collaboration creates a gain (a surplus) compared to uncoordinated or disconnected supply chain policies. In this paper we review policies to allocate the “gain” to supply chain members so that each firm’s objective becomes aligned with the supply chain’s objective. In other words we examine conditions for a successful implementation of “altruistic” behavior (that means a policy that is not optimal for itself, but optimal for global performance). Several policies are examined, such as alignment of replenishment rules, vendor managed inventory, buyback contracts, revenue sharing contracts and quantity discount contracts.