Equilibrium analysis in multi-echelon supply chain with multi-dimensional utilities of inertial players

In a supply chain, the importance of information elicitation from the supply chain players is vital to design supply chain network. The rationality and self-centredness of these players causes the information asymmetry in the supply chain and thus situation of conflict and non-participation of the players in the network design process. In such situations, it is required to analyse the supply chain players’ behaviour in order to explore potential for coordination through incentives. In this paper, a novel approach of social utility analysis is proposed to elicit the information for supply chain coordination among the supply chain players in a dyadic relationship – supplier and buyer. In principal, we consider a monopsony situation where buyer is a dominant player. With the objective of maximizing the social utility, efforts have been made to value behavioural issues in supply chain. On the other hand, the reluctance of player due to the information asymmetry is measured in the form of inertia – an offset to the supply chain profit. The suppliers’ behaviour is analysed with three distinct level of risk for two types of the product in procurement process. The useful insight from this paper is in supplier selection process where the reluctance of supplier offsets supply chain profit. The paper provides recommendations to supply chain managers for efficient decision-making ability in supplier selection process

Certify or not? An analysis of organic food supply chain with competing suppliers

Customers expect companies to provide clear health-related information for the products they purchase in a big data environment. Organic food is data-enabled with the organic label, but the certification cost discourages small-scale suppliers from certifying their product. This lack of a label means that product that satisfies the organic standard is regarded as conventional product. By considering the trade-off between the profit gained from organic label and additional costs of certification, this paper investigates an organic food supply chain where a leading retailer procures from two suppliers with different brands. Customers care about both the brand-value and quality (more specifically, if food is organic or not) when purchasing the product. We explore the organic certification and wholesale pricing strategies for suppliers, and the supplier selection and retail pricing strategies for the retailer. We find that when two suppliers adopt asymmetric certification strategy, the retailer tends to procure the product with organic label. The supplier without a brand name can compensate with organic certification, which leads to more profits than the branded rival. As the risk of being abandoned by the retailer increases, the supplier without a brand name is more eager than the rival to obtain the organic label. If both suppliers certify the product, however, they will fall into a prisoner’s dilemma under situation with low health utility from organic label and high certification cost