Coordination of Decentralized Supply Chains: A Literature Review

Due to the fact that the double margin exists in the decentralized supply chain, many papers focus on the coordination of decentralized supply chain. In this paper, we classify these papers into three parts according to the structure of supply chain. The first kind of supply chain consists of one upstream supplier and one downstream retailer. The second one consists of multiple suppliers and a single retailer. The last one refers to the supply chain with multiple suppliers and a single retailer. This paper can enable readers to get the knowledge of existing research on supply chain coordination. We also give some interesting future research concerning this topic

Supply Chain Contracting in the Presence of Supply Uncertainty and Store Brand Competition

In today\u27s complex business environment, manufacturers are striving to maintain a competitive advantage over their supply chain partners. Manufacturers\u27 profitability is tightly linked to their strategic interactions with other entities in the supply chain. While numerous studies have been conducted to investigate such interactions in supply chains, certain issues remain unresolved. We apply a game-theoretic framework to analyze two distinct supply chain structures in the presence of supply uncertainty and store brand competition in two essays, respectively. In the first chapter, we study a decentralized assembly supply chain under supply uncertainty. In a decentralized assembly supply chain, one assembler assembles a set of $n$ components, each produced by a different supplier, into a final product to meet an uncertain market demand. Each supplier faces an uncertain production capacity such that only the lesser of the planned production quantity and the realized capacity can be delivered to the assembler. We assume that the suppliers\u27 random capacities and the random demand can follow an arbitrary continuous multivariate distribution. We formulate the problem as a two-stage Stackelberg game. The assembler and the suppliers adopt a so-called Vendor-Managed-Consigned-Inventory (VMCI) contract. We analytically characterize the equilibrium of this game, based on which we obtain several managerial insights. Surprisingly, we show that when a supplier\u27s production cost increases or when his component salvage value decreases, it hurts all other members and the entire supply chain, but it might sometimes benefit this particular supplier. Similarly, when the suppliers do not have supply uncertainty, it benefits the assembler but it does not necessarily benefit the suppliers. Furthermore, we demonstrate that when the suppliers\u27 capacities become more positively correlated, the assembler is always better off, but the suppliers might be better or worse off. Later in the chapter, we also solve the game under the conventional wholesale-price contract. We find that the assembler always prefers the VMCI contract, and the suppliers always prefer the wholesale price contract. In addition, we illustrate that the VMCI contract is more efficient than the wholesale price contract for this decentralized assembly supply chain. In the second chapter, we consider a two-tier decentralized supply chain with a national brand supplier and a retailer. The national brand supplier (she) distributes her products to consumers through the retailer. Meanwhile, the retailer (he) intends to develop and produce his own store brand through a manufacturing source that is different from the national brand supplier. The retailer holds the store brand production unit cost as private information, for which the national brand supplier only has a subjective assessment. Given a supply contract offered by the national brand supplier, the retailer simultaneously decides whether to accept the contract and whether to produce the store brand. The national brand supplier aims to design an optimal menu of contracts to maximize her expected profit as well as extract the retailer\u27s private cost information. We formulate the problem as a two-stage screening game to analyze the strategic interaction between the two players. Despite the inherent computational complexity, we are able to derive the optimal menu of contracts for the national brand supplier, of which the format depends on the national brand supplier\u27s unit production cost. Furthermore, we investigate how the model parameters affect the value of information for each member in the supply chain. We show that the retailer\u27s private cost information becomes less valuable to both the national brand supplier and the retailer when the national brand unit production cost increases. We also illustrate that when the gap between the two possible cost values increases, the private cost information becomes more valuable to the national brand supplier, however the value of information to the retailer himself can either increase or decrease. Finally, we demonstrate that when the perceived quality of the national brand increases, the value of information to the retailer first decreases then increases, but the impact on the value of information to the national brand supplier can be either positive or negative

Analysis of the revenue-sharing contract under different power structures with application in the biodiesel niche market

Master'sMASTER OF ENGINEERIN

Examining price and service competition among retailers in a supply chain under potential demand disruption

© 2017 Elsevier Ltd Supply chain disruptions management has attracted significant attention among researchers and practitioners. The paper aims to examine the effect of potential market demand disruptions on price and service level for competing retailers. To investigate the effect of potential demand disruptions, we consider both a centralized and a decentralized supply chain structure. To analyze the decentralized supply chain, the Manufacturing Stackelberg (MS) game theoretical approach was undertaken. The analytical results were tested using several numerical analyses. It was shown that price and service level investment decisions are significantly influenced by demand disruptions to retail markets. For example, decentralized decision makers tend to lower wholesale and retail prices under potential demand disruptions, whereas a proactive retailer needs to increase service level with an increased level of possible disruptions. This research may aid managers to analyze disruptions prone market and to make appropriate decision for price and service level. The manufacturer or the retailers will also be able to better determine when to close a market based on the proposed analysis by considering anticipated disruptions. The benefits and usefulness of the proposed approach are explained through a real-life case adopted from a toy supply chain in Bangladesh

Dynamic Pricing and Supply Coordination with Reimbursement Contract under Random Yield and Demand

This paper investigates the dynamic pricing and supply chain coordination in a decentralized system that consists of one supplier and one manufacturer, in which both the market demand and production yield are stochastic. We show that the centralized expected profit is jointly concave in the production quantity and order quantity when the price is ex-ante selected. We also derive the equilibrium strategies in the decentralized system and prove that the entire profit of supply chain is inevitably lower than that under centralized system. Based on this, we propose a reimbursement contract to coordinate the decentralized supply chain so as to achieve the maximized profit. It is worth mentioning that, under reimbursement contract, the equilibrium production and order quantities are irrelevant to the manufacturer's risk sharing coefficient but are only determined by the supplier’s risk sharing coefficient

Financing Multiple Heterogeneous Suppliers in Assembly Systems: Buyer Finance vs. Finance

Buyer finance has been practiced by manufacturers/assemblers for years; however, few papers have investigated the efficacy of buyer finance in an assembly system with multiple suppliers. This paper fills the literature gap by comparing buyer finance with bank finance in a supply chain with one assembler and multiple heterogeneous capital-constrained component suppliers. We characterize the equilibrium solutions for different financing schemes (i.e., buyer finance, bank finance, and no finance). We show that in buyer finance the assembler should charge the suppliers the lowest possible interest rate, which may be even below its own unit capital opportunity cost, leading to interest losses in financing suppliers. However, the assembler can benefit more from enhanced inventory backup and lower component purchasing prices resulting from the low buyer-finance interest rate. We further compare the two financing schemes from the perspectives of the assembler, the borrowing and nonborrowing suppliers, and the whole supply chain. Our analysis reveals that the assembler may offer buyer finance even if its own unit capital opportunity cost is higher than the bank risk-free interest rate. We also demonstrate how the suppliers’ initial capitals, production costs, and their heterogeneities affect the assembler’s selection of the optimal financing scheme and identify the conditions under which buyer finance is better than bank finance for different parties in this assembly supply chain

Coordinating a Supply Chain When Manufacturer Makes Cost Reduction Investment in Supplier

We consider a supply chain consisting of an upstream supplier and a downstream manufacturer, in which the supplier provides a component to the manufacturer, facing a price-sensitive and uncertain demand. The manufacturer makes cost reduction investment in the supplier to improve the supplier’s production efficiency, which benefits the entire supply chain. We derive the optimal investment and operating decisions. Both the centralized and decentralized supply chains are studied. We show that the optimal investment and operating decisions in the decentralized setting may deviate from that in the centralized setting. To avoid the profit loss caused by such a deviation, we develop a coordination mechanism by introducing a combined policy of revenue-sharing policy and investment cost-sharing policy. We also show that the developed coordination mechanism can achieve Pareto improvement for the two players

An evolutionary stage model of outsourcing and competence destruction : a Triad comparison of the consumer electronics industry

Outsourcing has gained much prominence in managerial practice and academic discussions in the last two decades or so. Yet, we still do not understand the full implications of outsourcing strategy for corporate performance. Traditionally outsourcing across borders is explained as a cost-cutting exercise, but more recently the core competency argument states that outsourcing also leads to an increased focus, thereby improving effectiveness. However, no general explanation has so far been provided for how outsourcing could lead to deterioration in a firm‟s competence base. We longitudinally analyze three cases of major consumer electronics manufacturers, Emerson Radio from the U.S., Japan‟s Sony and Philips from the Netherlands to understand the dynamic process related to their sourcing strategies. We develop an evolutionary stage model that relates outsourcing to competence development inside the firm and shows that a vicious cycle may emerge. Thus it is appropriate to look not only at how outsourcing is influenced by an organization‟s current set of competences, but also how it alters that set over time. The four stages of the model are offshore sourcing, phasing out, increasing dependence on foreign suppliers, and finally industry exit or outsourcing reduction. The evolutionary stage model helps managers understand for which activities and under which conditions outsourcing across borders is not a viable option. Results suggest that each of these firms had faced a loss of manufacturing competitiveness in its home country, to which it responded by offshoring and then outsourcing production. When a loss of competences occurred, some outsourcing decisions were reversed

Collaborative Policy of the Supply-Hub for Assemble-to-Order Systems with Delivery Uncertainty

This paper considers the collaborative mechanisms of the Supply-Hub in the Assemble-to-Order system (ATO system hereafter) with upstream delivery uncertainty. We first propose a collaborative replenishment mechanism in the ATO system, and construct a replenishment model with delivery uncertainty in use of the Supply-Hub. After transforming the original model into a one-dimensional optimization problem, we derive the optimal assembly quantity and reorder point of each component. In order to enable the Supply-Hub to conduct collaborative replenishment with each supplier, the punishment and reward mechanisms are proposed. The numerical analysis illustrates that service level of the Supply-Hub is an increasing function of both punishment and reward factors. Therefore, by adjusting the two factors, suppliers’ incentives of collaborative replenishment can be significantly enhanced, and then the service level of whole ATO system can be improved