Cooperation and profit allocation in distribution chains

We study the coordination of actions and the allocation of profit in distribution chains under decentralized control. We consider distribution chains in which a single supplier supplies goods for replenishment of stocks of several retailers who, in turn, sell these goods to their own separate markets. The goal of the supplier and the retailers is to maximize their individual profits. Since the optimal joint profit under centralized control is larger than the sum of the individual optimal profits under decentralized control, cooperation among firms by means of coordination of actions may improve individual profits. The effects of cooperation are studied by means of cooperative games. For each distribution chain we define a corresponding cooperative game and study its properties. Among others we show that such games are balanced. Based on the nice core structure a stable solution concept for these games is proposed and its properties are interpreted in terms of the underlying distribution chain. \u

Supply chain collaboration

In the past, research in operations management focused on single-firm analysis. Its goal was to provide managers in practice with suitable tools to improve the performance of their firm by calculating optimal inventory quantities, among others. Nowadays, business decisions are dominated by the globalization of markets and increased competition among firms. Further, more and more products reach the customer through supply chains that are composed of independent firms. Following these trends, research in operations management has shifted its focus from single-firm analysis to multi-firm analysis, in particular to improving the efficiency and performance of supply chains under decentralized control. The main characteristics of such chains are that the firms in the chain are independent actors who try to optimize their individual objectives, and that the decisions taken by a firm do also affect the performance of the other parties in the supply chain. These interactions among firms’ decisions ask for alignment and coordination of actions. Therefore, game theory, the study of situations of cooperation or conflict among heterogenous actors, is very well suited to deal with these interactions. This has been recognized by researchers in the field, since there are an ever increasing number of papers that applies tools, methods and models from game theory to supply chain problems

Using simulation gaming to validate a mathematical modeling platform for resource allocation in disasters

The extraordinary conditions of a disaster require the mobilisation of all available resources, inducing the rush of humanitarian partners into the affected area This phenomenon called the proliferation of actors, causes serious problems during the disaster response phase including the oversupply, duplicated efforts, lack of planning In an attempt to reduce the partner proliferation problem a framework called PREDIS (PREdictive model for DISaster response partner selection) is put forward to configure the humanitarian network within early hours after disaster strike when the information is scarce To verify this model a simulation game is designed using two sets of real decision makers (experts and non-experts) in the disaster Haiyan scenario The result shows that using the PREDIS framework 100% of the experts could make the same decisions less than six hours comparing to 72 hours Also between 71% and 86% of the times experts and non-experts decide similarly using the PREDIS framewor

Cooperation in an HMMS-type supply chain: A management application of cooperative game theory = Kooperáció egy HMMS-típusú ellátási láncban: A kooperatív játékelmélet egy menedzsment alkalmazása

We apply cooperative game theory concepts to analyze a Holt-Modigliani-Muth-Simon (HMMS) supply chain. The bullwhip effect in a two-stage supply chain (supplier-manufacturer) in the framework of the HMMS-model with quadratic cost functions is considered. It is assumed that both firms minimize their relevant costs, and two cases are examined: the supplier and the manufacturer minimize their relevant costs in a decentralized and in a centralized (cooperative) way. The question of how to share the savings of the decreased bullwhip effect in the centralized (cooperative) model is answered by the weighted Shapley value, by a transferable utility cooperative game theory tool, where the weights are for the exogenously given “bargaining powers” of the participants of the supply chain. = A cikkben a kooperatív játékelmélet fogalmait alkalmazzuk egy Holt-Mogigliani-Muth-Simon-típusú ellátási lánc esetében. Az ostorcsapás-hatás elemeit egy beszállító-termelő ellátási láncban ragadjuk meg egy kvadratikus készletezési és termelési költség mellett. Feltételezzük, hogy mindkét vállalat minimalizálja a releváns költségeit. Két működési rendszert hasonlítunk össze: egy hierarchikus döntéshozatali rendszert, amikor először a termelő, majd a beszállító optimalizálja helyzetét, majd egy centralizált (kooperatív) modellt, amikor a vállalatok az együttes költségüket minimalizálják. A kérdés úgy merül fel, hogy a csökkentett ostorcsapás-hatás esetén hogyan osszák meg a részvevők ebben a transzferálható hasznosságú kooperatív játékban a költség megtakarítást, exogén módon adott tárgyalási pozíció mellett

Game theoretic contribution to horizontal cooperation in logistics

International audienceHorizontal cooperation in logistics was proved globally advantageous, but we see only few realizations until now. The main obstacle to the successful implementation of horizontal cooperation is the absence of appropriate cooperation decision making model, consisting of the detailed cooperation process, the optimization model, and the stable-and-fair gain sharing mechanism. In this paper, we propose a practical cooperation decision making model for the realization of horizontal logistics cooperation scheme. This model is a decision process integrating an optimization tool and a game-theoretic approach to find a feasible allocation rule, and stable coalitions related to coalition structures issue. We propose a weighted allocation rule that takes bargaining power, contribution and core stability into account, and generalize it in games with coalition structure. Then we investigate related stability issue under two different cooperation patterns. At the end, we present a case study of France retail supply network, which verifies the cooperation model we proposed

Overview and classification of coordination contracts within forward and reverse supply chains

Among coordination mechanisms, contracts are valuable tools used in both theory and practice to coordinate various supply chains. The focus of this paper is to present an overview of contracts and a classification of coordination contracts and contracting literature in the form of classification schemes. The two criteria used for contract classification, as resulted from contracting literature, are transfer payment contractual incentives and inventory risk sharing. The overview classification of the existing literature has as criteria the level of detail used in designing the coordination models with applicability on the forward and reverse supply chains.Coordination contracts; forward supply chain; reverse supply chain

Profit allocation in agricultural supply chains: exploring the nexus of cooperation and compensation

In this paper, we focus on decentralized agricultural supply chains consisting of multiple non-competing distributors satisfying the demand of their respective markets. These distributors source a single product from a farmer through an agricultural cooperative, operating in a single period. The agents have the ability to coordinate their actions to maximize their profits, and we use cooperative game theory to analyze cooperation among them. The distributors can engage in joint ordering, increasing their order size, which leads to a decrease in the price per kilogram. Additionally, distributors have the opportunity to cooperate with the farmer, securing a reduced price per kilogram at the cost price, while compensating the farmer for any kilograms not acquired in the cooperation agreement. We introduce multidistributor-farmer games and we prove that all the agents have incentives to cooperate. We demonstrate the existence of stable allocations, where no subgroup of agents can be better off by separating. Moreover, we propose and characterize a distribution of the total profit that justly compensates the contribution of the farmer in any group of distributors. Finally, we explore the conditions under which the farmer can be compensated in order to maximize their revenues when cooperating with all players

A Reply to Mueller (2018) Supply Chain Collaboration: Further Insights into Incentive Alignment in the Beer Game Scenario

Purpose: We expand a previous discussion in this journal by proposing a new solution concept, based on game theory, for profit allocation with the aim of aligning incentives in collaborative supply chains. Design/methodology/approach: Through the Gately’s notion of propensity to disrupt, we minimize the desire of the nodes to leave the grand coalition in the search of a self-enforcing allocation mechanism. Findings: We discuss the benefits and limitations of this solution in comparison with more established alternatives (e.g. nucleolus and Shapley value). We show that it considers the bargaining power of the nodes, but it may not belong to the core. Originality/value: Finding a fair and self-enforcing scheme for incentive alignment, and specifically profit allocation, is essential to ensure the long-term sustainability of collaborative supply chains.Peer Reviewe

Game theoretic optimisation in process and energy systems engineering: A review

Game theory is a framework that has been used by various research fields in order to represent dynamic correlation among stakeholders. Traditionally, research within the process and energy systems engineering community has focused on the development of centralised decision making schemes. In the recent years, decentralised decision-making schemes have attracted increasing attention due to their ability to capture multi-stakeholder dynamics in a more accurate manner. In this article, we survey how centralised and decentralised decision making has been facilitated by game theoretic approaches. We focus on the deployment of such methods in process systems engineering problems and review applications related to supply chain optimisation problems, design and operations, and energy systems optimisation. Finally, we analyse different game structures based on the degree of cooperation and how fairness criteria can be employed to find fair payoff allocations