Abstract:The coordination problem of a multi-period supply chain for single type of products composed of one manufacturer and one retailer is discussed. In such a supply chain, a decision-making model is proposed by combining quantity flexibility contract with options. The demand uncertainty is described by a finite number of the possible scenarios. The stochastic programming model based on scenarios is solved through progressive hedging algorithm. In this algorithm, optimal option purchase quantities and order quantities for the retailer and optimal raw materials purchase quantities and production quantities for the manufacturer can be calculated. Finally, a numerical simulation experiment is given to validate the effectiveness of the proposed model.