Supply Contracts at SkiRetail (Case)

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1. Waht is my estimate of the quantity of ski jackets that SkiRetail should place an order for?

2. What is the global optimum profit level in this case? In case of a buy-back contract, since we will buy up the unsold inventory form SkiRetail, there would be no additional revenue form third-party discount retailers. However, in the case of the revenue-sharing model, additional revenue sould flow into the supply chain from third-party discount retialers. In that case, will the global optimum profit levels remain the same? How should I account for the difference?

3. In the case of a buy-back contract, what is the optimal buy-back price Skiekz should propose?

4. In the case of a revenue-sharing contract, what is the optimal sales price Skiekz should propose, given that SkiRetail is willing to share 15% of its revenues from regular sales?

5. Should I recommend a buy-back contract or a revenue-sharing contract? Why? What are the potential benefits and risks associated with each?

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