Supply chain management has attracted managers and researchers attention during the last two decades. Since uncoordinated decisions of independent units of supply chain can lead to deviation of system optimal performance, the supply chain coordination is emerged as one of the most important and appealing subjects. In the literature, contract design mechanisms are introduced as appropriate techniques for coordination.In this research, coordination of a two echelon supply chain consisting of one supplier-retailer through a new contract is studied. In the contract retailer commits to purchase a total minimum quantity over the planning horizon. In return, the supplier to encourage the retailer to commit a larger amount of commitment, in addition of a discount suggestion ensures the retailer to buyback his unsold products at the end of the last period. The problem is formulated as multi period problem in a stochastic demand setting and a stochastic dynamic programming model is proposed to solve this problem. At first, the necessary conditions for system coordination and optimal order decisions of retailer are obtained. Then the effects of various effective parameters such as commitment, buyback price and discount on the expected profit are sensitivity analyzed. Computational results indicate that system expected profits increase by using mentioned contract, under certain range of commitments and buyback prices. In addition, by increasing the buyback price contract acceptance would be profitable in larger amount of commitments. This computational study can be used as a tool to compare different contracts and to choose the best available ones.
