Abstract: For a short-life-cycle product supply chain with controlled lead-time, the lead-time compression would raise the demand forecast accuracy of distributor, while would increase the production cost of manufacturer as well. So the supply chain management is obliged to solve the optimal ordering point and the optimal ordering quantity, as well as the coordination of distributor and manufacturer. The decision models of decentralized and centralized supply chain were proposed respectively. The optimal decisions of each party in both decentralized and centralized systems were solved. Further, an incentive scheme is developed to facilitate coordination between the two parties. The results show that the dynamic wholesale price contract based on order rebate and penalty policy is able to coordinate the supply chain with double time-varying parameters effectively, and this contract allows the system efficiency to be achieved as well as to improve the profits of all parties by tuning the contract parameter α.

Key words: supply chain coordination, short-life-cycle product, time-varying parameter, order rebate and penalty police