Abstract: With the development of globalization and specialization, modern supply chain becomes leaner but also more fragile than before. Meanwhile, diversification of customer taste makes it much more harder to predict demand. All these together put supply chain in an environment where both supply and demand are uncertain.Moreover, due to the growing uncertainty faced by supply chain and business philosophy changing from "competition" to "competition and cooperation", traditional contract designed for determined environment can no longer function very well.With the observation of all that, relational contract is modeled into supply chain where both supply and demand are uncertain. Thus Stackelberg model is first used to build an two-echelon supply chain consists of one supplier and one retailer, and it's supply and demand uncertainties are described by random yield function and newsvendor model, respectively.Then a relational type commitment contract,in which supplier commits on least-supply quantity q and retailer commits on max-purchase quantity Q is designed.By analyzing the decision-making process about both centralized and decentralized scenario under the above contract, it is found that, for centralized supply chain, there is always an optimal strategy no matter whether Q or q is or are the decision variable respectively or simultaneously. For decentralized supply chain, all optimal strategy share one common threshold w(wholesale price)=p(emergency purchase price). When w>=p, supplier will rely more on emergency purchase, but may lose expected payoff due to lower marginal profit compared to w=p, but his expected payoff will decrease. On the contrary, supplier's expected payoff will increase due to larger order from retailer.What's more interesting is that, counter intuitively, a "p" bigger than "w" won't always hurt in our contract, it can actually improve decentralized supply chain's overall performance, which is important because business competition is shifting from inter-enterprise to inter-supply chain.At last, the parameters in our model are specified by their reality constraints, the numerical analysis shows that our contract can improve the decentralized supply chain's performance to more than 95% of the centralized one's and sensitivity analysis of p, supply and demand uncertainty on contract parameter, optimal strategy and expected payoff are also conducted.Over all, the research of SCM is extended by combining supply and demand uncertainty and relational contract together, and some useful managerial insights are provided for supply chain managers under themuch more uncertain business environment.

Key words: random yield, stochastic demand, commitment contract, relational supply chain, decision model