On Transshipment Games with Identical Newsvendors

In a transshipment game, supply chain agents cooperate to transship surplus products. This note studies the effect of size of transshipment coalitions on the optimal production/order quantities. It characterizes these quantities for transshipment games with identical newsvendors and normally distributed market demands. It also gives a closed form formula for equal allocation in their cores

A review of non-cooperative newsvendor games with horizontal inventory interactions

There are numerous applications of game theory in the analysis of supply chains where multiple actors interact with each other in order to reach their own objectives. In this paper we review the use of non-cooperative game theory in inventory management within the newsvendor framework describing a single period inventory control model with the focus on horizontal interactions among multiple independent newsvendors. We develop a framework for identifying these types of horizontal interactions including, for example, the models with the possibility of inventory sharing via transshipments, and situations with substitutable products sold by multiple newsvendors. Based on this framework, we discuss and relate the results of prior research and identify future research opportunities

A win-win supply chain solution using project contracts with bargaining games

For product supply chains, contractual relationships that provide win-win outcomes between the supply chain members, have been found to offer optimum results. However, for bargaining situations where time/cost is the source of the uncertainty, i.e. projects, there is limited knowledge available on how contracts can be used to establish win-win relations. This paper investigates whether cost-sharing project contracts can establish a win-win solution in project supply chains where the project manager is risk-neutral and the contractor is risk-averse. The paper examines how the theory can be extended beyond the symmetrical normal distributions to asymmetrical beta and gamma distributions that are more appropriate, and so more often used, for project completion times. Besides using the Nash bargaining approach for analyzing the bargaining process, the paper also analyzes the bargaining problems using the Kalai-Smorodinsky and Utilitarian approaches to bargaining. It was found that the solutions from cost-plus contracts dominate any other form of cost-sharing contract, and so they provide a win-win solution for both members of the supply chain for the cases of Nash and Kalai-Smorodinsky bargaining. However, this is not the case for Utilitarian bargaining. A numerical exercise was conducted to investigate the results and implications of how the models would work in practice. The research shows that from a theoretical perspective, cost-plus contracts are the optimal bargaining solution not only when using a normal distribution, but also when using more appropriate asymmetrical distributions. This optimality is robust for the Nash and Kalai-Smorodinsky bargaining approaches, but not for the Utilitarian approach whose sensitivity to noise makes it an inappropriate choice here

Coordinating Contracts in SCM: A Review of Methods and Literature

Supply chain coordination through contracts has been a burgeoning area of re- search in recent years. In spite of rapid development of research, there are only a few structured analyses of assumptions, methods, and applicability of insights in this field. The aim of this paper is to provide a systematic overview of coordinating contracts in supply chain through highlighting the main concepts, assumptions, methods, and present the state-of-the- art research in this field

Coordinating Contracts in SCM: A Review of Methods and Literature

Supply chain coordination through contracts has been a burgeoning area of re- search in recent years. In spite of rapid development of research, there are only a few structured analyses of assumptions, methods, and applicability of insights in this field. The aim of this paper is to provide a systematic overview of coordinating contracts in supply chain through highlighting the main concepts, assumptions, methods, and present the state-of-the- art research in this field

The Impact of Green Metrics on Inventory Transshipment

Green is associated with life and is becoming increasingly engrained in not just life, but the way people do business as well. In recent years, a growing number of business operations have adopted various green metrics to limit their carbon footprints and environmental pollution, drive sustainable operations, contribute more to sustainability projects, and appear more socially responsible within the industry and host communities. While these initiatives target reducing carbon footprints, their impact on daily operations in a sharing economy is yet to be explored. In this thesis, I performed a thorough review of green supply chains, recent green practices, and metrics adopted in various organizations, followed by a comparative study to analyze the impact of operational decisions in inventory and transshipment when green metrics are considered. I extended the classical inventory transshipment model with two newsvendors’ retailers by allowing the retailers to incorporate direct or indirect green metrics as part of the objective function. In this setting, I explored three central research questions: 1) How would the adoption of green metrics impact the expected profit and equilibrium order quantities under inventory transshipment? 2) Would green metrics negatively or positively impact the coordinating transshipment prices? 3) What is the impact of direct vs. indirect green metrics on expected profit and equilibrium order quantities? Based on extensive numerical simulation, I find that when the profit margin is high, the impact of green metrics is limited—there is almost no change to a slight decrease in expected profit and the equilibrium order quantity when green metrics are considered. However, when the profit margin is low, the green metrics may improve the expected profits while reducing equilibrium order quantities. Interestingly, introducing green metrics does not affect coordinating transshipment prices, irrespective of profit margins. Direct versus indirect metrics have a limited impact on equilibrium order quantity and expected profit. My study contributes to the research by identifying the operational benefits of adopting green metrics. As an extension, this work may create a foundation for further work to determine the cost and benefits of implementing green metrics in practice and the key trade-offs in sustainability or social responsibility

A coordinating contract for transshipment in a two-company supply chain

We study a supply chain with two independent companies producing an identical product and cooperating through transshipment. Previous studies of this chain show that only under certain conditions, linear transshipment prices could be found that induce the companies to choose the first best production quantities. Moreover, even if such transshipment prices do exist, they result in a unique division of total expected profit and thus they cannot accommodate arbitrary divisions of the profit. Using the Generalized Nash Bargaining Solution, we derive coordinating transshipment prices that always give rise to a coordinating contract for the chain. This contract relies on an implicit pricing mechanism

A coordinating contract for transshipment in a two-company supply chain

We study a supply chain with two independent companies producing an identical product and cooperating through transshipment. Previous studies of this chain show that only under certain conditions, linear transshipment prices could be found that induce the companies to choose the first best production quantities. Moreover, even if such transshipment prices do exist, they result in a unique division of total expected profit and thus they cannot accommodate arbitrary divisions of the profit. Using the Generalized Nash Bargaining Solution, we derive coordinating transshipment prices that always give rise to a coordinating contract for the chain. This contract relies on an implicit pricing mechanism.Group decisions and negotiations Transshipment Contracts Coordination Game theory

Analysis of the Project Supply Chains: Coordination and Fair Allocation

This research investigates how project contracts can coordinate the supply chain between a project manager and contractor and if the solutions can be ensured as equitable. The main features of this type of supply chain are the trade-offs between the selection of a higher rate of resource consumption with a consequent higher cost to the contractor and a lower rate of resource consumption leading to later delivery and a reduction of the project-reward to the project manager. This broader problem could lead to a coordination problem for the overall supply chain. This research proposed a solution to this broader problem in two different scenarios: Take it or leave it scenario and negotiation scenario. Finally, the fair allocation of the risks and benefits and the related decision-making issues are addressed as one of the behavioural barriers to the supply chain coordination. The coordination issues in a take it or leave it scenario are addressed using time-based and fixed price project contracts using Stackelberg games. Models of coordination were proposed with time-based contracts, but the fixed price contracts failed to coordinate. The coordination problems in negotiation scenario are addressed with the Nash's bargaining, the Kalai Smorodinsky bargaining, and the utilitarian approach. A cost plus contract has been found to dominate the solutions over any cost sharing contract and fixed price contract for Nash's bargaining and Kalai Smorodinsky bargaining cases. Finally, the issues of fairness of allocation of risks and benefits as one of the challenges of supply chain coordination, have been investigated. The fixed price contracts were found to coordinate the supply chain under consideration alongside the time-based contracts if the members had fairness concern. Some of the key features of this research include the incorporation of various probability distributions for the project completion time and cost, the inclusion of various forms of risk preference, and addressing the challenges of fair allocation in project supply chains