Short answer

Implement hybrid cost and revenue sharing models within your supply chain to incentivize the production of greener products and achieve greater profitability.

Field: Resource Management
Source: International Journal of Production Research (2020)
Method: Analytical modelling of a two-echelon supply chain with demand influenced by price and green quality.
Evidence: Strong effect

A novel contract structure can simultaneously improve a product's environmental quality, lower its price, and increase profits for both manufacturers and retailers in a green supply chain. This resource management research insight is drawn from a 2020 study published in International Journal of Production Research. Using Analytical modelling of a two-echelon supply chain with demand influenced by price and green quality., researchers explored how this design variable affects real-world outcomes. The key design takeaway: Implement hybrid cost and revenue sharing models within your supply chain to incentivize the production of greener products and achieve greater profitability.

Study

Resource ManagementHigh ImpactStrong effect

Hybrid Greening Cost and Revenue Sharing Contract Boosts Green Quality and Profitability

A novel contract structure can simultaneously improve a product's environmental quality, lower its price, and increase profits for both manufacturers and retailers in a green supply chain.

International Journal of Production Research · 2020

Key Findings

01The HGRS contract effectively achieves channel coordination, leading to increased profits for both supply chain members compared to decentralized decision-making.
02The HGRS contract incentivizes higher product green quality, lower selling prices, and stimulates market demand.
03The HGRS contract simultaneously enhances customer satisfaction through lower prices and promotes sustainable operations by increasing the product's greenness level.

Application

Design takeaway

Implement hybrid cost and revenue sharing models within your supply chain to incentivize the production of greener products and achieve greater profitability.

How to apply

Explore implementing a 'greening cost sharing' component where the retailer contributes to the manufacturer's investment in eco-friendly production, coupled with a 'revenue sharing' mechanism where profits from increased sales are distributed.

Project actions

01When researching a product, consider how the supply chain affects its environmental impact.
02Think about how different contracts or agreements between suppliers and manufacturers could encourage greener designs.

Method & Evidence

AimHow can a hybrid contract structure incentivize manufacturers and retailers to improve product green quality and achieve channel coordination in a green supply chain?

MethodAnalytical modelling of a two-echelon supply chain with demand influenced by price and green quality.

ProcedureDeveloped and analyzed a hybrid 'greening cost sharing' and 'revenue sharing' contract (HGRS) to model the interactions between a manufacturer and a retailer concerning product green quality and selling price.

ContextGreen supply chain management, product development, and retail pricing strategies.

Variables

IV["Type of supply chain contract (e.g., HGRS vs. decentralized)","Manufacturer's investment in green quality"]

DV["Product green quality","Selling price","Market demand","Manufacturer profit","Retailer profit"]

CV["Consumer environmental awareness level","Demand function parameters"]

Strengths & Limitations

Strengths

+Provides a clear analytical framework for green supply chain coordination.
+Offers a novel contract design (HGRS) with demonstrated benefits.

Limitations

This study uses mathematical models, so real-world implementation might face challenges due to unpredictable market conditions or complex negotiation dynamics.

Reliability & validity

The analytical model's reliability depends on the accuracy of the assumed demand and cost functions. Validity is supported by the logical derivation of outcomes that align with economic principles of incentive alignment.

Think critically

To what extent can purely economic incentives drive genuine environmental commitment, or are there other factors that need to be considered for long-term sustainability?

Design Principles

"Incentivize sustainability through shared financial benefits across the supply chain."

This research offers a practical framework for businesses aiming to integrate sustainability into their core operations without sacrificing financial performance. By aligning incentives, it encourages investment in greener production and more competitive pricing, ultimately benefiting both the business and the environmentally conscious consumer.

What This Means for Your Design

A special deal between companies making and selling a product can make the product better for the environment, cheaper for people to buy, and make both companies more money.

How to use in your project

1.Reference this study when discussing the economic feasibility of sustainable design choices or the impact of supply chain agreements on product development.

Add to My Project

Quick Cite

Paragraph starter

Research indicates that hybrid contracts, such as 'greening cost sharing' and 'revenue sharing,' can effectively coordinate green supply chains, leading to enhanced product environmental quality, reduced consumer prices, and increased profitability for all stakeholders. This suggests that economic incentives play a significant role in driving sustainable design and production practices.

Source

International Journal of Production Research

Balancing price and green quality in presence of consumer environmental awareness: a green supply chain coordination approach

journal · 2020

View source

Questions About This Research

What does the research say about hybrid greening cost and revenue sharing contract boosts green quality and profitability?: Implement hybrid cost and revenue sharing models within your supply chain to incentivize the production of greener products and achieve greater profitability. Evidence: International Journal of Production Research (2020).
Why does "Hybrid Greening Cost and Revenue Sharing Contract Boosts Green Quality and Profitability" matter for design?: This research offers a practical framework for businesses aiming to integrate sustainability into their core operations without sacrificing financial performance. By aligning incentives, it encourages investment in greener production and more competitive pricing, ultimately benefiting both the business and the environmentally conscious consumer.
How can designers apply this research?: Implement hybrid cost and revenue sharing models within your supply chain to incentivize the production of greener products and achieve greater profitability.
What were the main findings?: The HGRS contract effectively achieves channel coordination, leading to increased profits for both supply chain members compared to decentralized decision-making.. The HGRS contract incentivizes higher product green quality, lower selling prices, and stimulates market demand.. The HGRS contract simultaneously enhances customer satisfaction through lower prices and promotes sustainable operations by increasing the product's greenness level.
What research method was used?: Analytical modelling of a two-echelon supply chain with demand influenced by price and green quality..
How strong is the evidence?: Evidence strength is rated Strong effect, based on a 2020 journal from International Journal of Production Research.
What should I do differently in my next project?: Explore implementing a 'greening cost sharing' component where the retailer contributes to the manufacturer's investment in eco-friendly production, coupled with a 'revenue sharing' mechanism where profits from increased sales are distributed.
What are the limitations?: The model assumes a two-echelon supply chain and specific functional relationships for demand and greening costs, which may not perfectly reflect all real-world scenarios.