Coordinating a supply chain under demand and cost disruptions

In this paper, we investigate the coordination of a supply chain consisting of one manufacturer and n Bertrand competing retailers under disruptions of market demand and production cost. We present a coordination model of a supply chain under normal scenarios. Our findings demonstrate that the coordination scheme designed for the initial production plan should be revised when disruptions of market demand and production cost occur. To resolve this issue, we consider the possible deviation costs caused by disruptions and propose optimal decision models for different disruptions under centralised decision-making. We present an improved revenue-sharing contract model to coordinate the decentralised supply chain under disruptions. The proposed models are then further analysed through numerical examples.     

Integrated order selection and production scheduling under MTO strategy

We consider an integrated order selection and production scheduling problem where a make-to-order (MTO) manufacturer has to select a subset of the orders to process so as to maximise the total profit, and sequence-dependent setup times and costs are incurred between the manufacturing of different classes of products. The problem is formulated as the resource-constrained profitable tour problem (RCPTP) where many variants of the traveling salesman problem (TSP) are its special cases. We model the problem as an integer program and develop an efficient algorithm to solve the problem. Computational results show the efficiency as well as effectiveness of the algorithm. The benefit of the integration is shown and managerial insights are discussed with the computational experiments as well.     

Pricing decisions for three-echelon supply chain with advertising and quality effort-dependent fuzzy demand

Simultaneous influence of market power structure, advertising and quality efforts on the optimal pricing decisions and performance of a multi-echelon supply chain under uncertainty have received scant attention in the literature. We focus on this gap by examining a serial decentralised three-echelon supply chain consisting of a supplier, a manufacturer and a retailer. The uncertainty associated with customer demand, marginal production costs and effort costs is expressed as linguistic or fuzzy variables. We analyse centralised supply chain to obtain all benchmark parameters. We investigate four decentralised supply chain cases through fuzzy game theoretic approach. We compare among three Stackelberg games with various supply chain leaderships and a vertical Nash. Our key findings are as follows. First, the manufacturer puts least quality effort while retailer puts least advertising effort when they act as Stackelberg leader in a three-echelon supply chain. Second, supplier's per unit price is governed by the channel leadership in three-echelon supply chain while retail prices are less affected by the leadership. We investigate the impact of fuzzy degree of quality and advertising sensitivity on optimal profit distribution among agents. We present numerical analysis to illustrate the importance of the derived theoretical results and discuss additional managerial insights.     

A basic model for co-ordinating a four-level supply chain of a product with a vendor,multiple buyers and tier-1 and tier-2 suppliers

This paper investigates the co-ordination of order quantities amongst the players in a four-level supply chain with a centralised decision process. The first level of the supply chain consists of multiple buyers, the second level of a vendor (manufacturer), the third level consists of multiple tier-1 suppliers, and the fourth level consists of multiple tier-2 suppliers. Each supplier supplies one or more items that are components of the product produced by the manufacturer. The model developed in this paper guarantees that the local costs for the players either remain the same as before co-ordination, or decrease as a result of co-ordination. A mathematical model is developed, with numerical examples presented and results discussed.     

Equilibrium analysis of distribution channel structures under power imbalance and asymmetric information

This paper investigates the problem of channel choice game in two power-imbalanced supply chains consisting of the leader supply chain and the follower supply chain. We assume that there exists symmetric and asymmetric cost information between the two supply chains, and that the two chains as well as the two members in each chain follow the Stackelberg game setting. We analyse four competition scenarios: both chains are decentralised, where individual members of both supply chains maximise their own profits by independently selecting their price policies; both chains are integrated, where manufacturers and retailers coordinate their decisions to maximise supply chain profits; the leader chain is decentralised and the follower integrated; the leader is integrated and the follower decentralised. The primary objective of this paper is to investigate the influence of power imbalance, information asymmetries, and the degree of product substitutability under channel choice equilibrium. We find that, in contrast to earlier literature where all manufacturers share equal or balanced decision-making power, an integrated distribution channel is the dominant strategy for the leader under symmetric and asymmetric information Stackelberg game. As the degree of product substitutability increases, the follower will gradually switch from integrated distribution channel to decentralised distribution channel; the follower can gain from constructing a decentralised distribution channel as the prediction accuracy of the leader increases.     

Integrated product design,shelf-space allocation and transportation decisions in green supply chains

In this paper, we examine a supply chain consisting of a manufacturer and retailer where the manufacturer undertakes greening efforts in terms of pack-size reduction and transportation cost reduction. The retailer decides on shelf-space allocation for the product. Both the players benefit from the greening efforts of the manufacturer. In such a setting, we examine strategic decisions of the players and compare and contrast the performance of the decentralised supply chain with the centralised supply chain. We also examine the effect of collaborative mechanisms by modelling two contracts in which the retailer offers a transportation cost reduction effort based contract and a two-part tariff contract. We find that the decentralised supply chain leads to lower greening efforts and shelf-space allocation decisions. We also find that the contracts improve pack-size reduction effort, transportation cost reduction effort and shelf-space allocation, while also improving the profitability of individual players. The findings demonstrate a scope for supply chain collaboration between manufacturer–retailer pairs in this setting. The paper uniquely combines three critical elements in supply chains, namely, product design, transportation and retailing decisions, and aims to provide insights into the decision making of players considering environmental waste and pollution. The paper also reflects consumer behavior and trade-offs that the supply chain players face.     

Pull and push contracts in a decentralised assembly system with random component yields

This study investigates how random component yields can influence pricing and production decisions under pull and push contracts. We consider a decentralised assembly system where a manufacturer procures complementary components from two suppliers with random yields. We first characterise the centralised equilibrium decision as a benchmark and then analyse the equilibrium solutions in a decentralised assembly system under each contract. We find that neither contract is always superior to the other in terms of system profit. Under a push contract, suppliers always achieve the first mover advantage with higher payoff. However, the first mover advantage does not hold for the manufacturer under a pull contract. We further conduct sensitivity analysis to study the impact of random component yields and retail price on equilibrium solutions under each contract. Interestingly, the wholesale prices charged by suppliers always increase with supply yield uncertainty under a pull contract, but decrease under a push contract. In contrast with the centralised solution, the equilibrium quantities in the decentralised solution decrease with supply yield uncertainty under both pull and push contracts. We then extend our model to a general case with multiple suppliers. The system payoff decreases with the number of suppliers, and the main results derived in two suppliers setting still hold in the system with multiple suppliers.     

Decentralised decision-making with information sharing vs. centralised decision-making in supply chains

In recent years, implementing coordination mechanisms in decentralised supply chains to reduce the well-known negative effects of decentralisation, such as the ‘bullwhip effect’, has become a considerable challenge. Furthermore, with the dramatic developments in information and communication technologies, real-time information sharing has become increasingly easier to implement. In this work, we study a mono-product divergent supply chain composed of a supplier, a warehouse, retailers and customers in the context of decentralised and centralised decisions. The main objective of this study is to compare a decentralised supply chain combined with different scenarios of simultaneous upstream and downstream information sharing vs. a centralised supply chain. A mathematical model is developed to compare the logistics costs in the two decision contexts. The experimental results clearly show that the simultaneous sharing of customer demand and supplier-warehouse lead time information in a decentralised supply chain yields nearly equivalent logistics costs as the centralised supply chain context. However, the main beneficiary of the sharing is the warehouse, which receives approximately two-thirds of the benefit. Thus, incentives and revenue sharing contracts should be implemented to motivate and balance the benefits between supply chain partners.     

Decentralised planning coordination with quantity discount contract in a divergent supply chain

This paper proposes to solve a supply chain planning problem with realistic features. The problem consists of planning productions, transportations and storage activities in a supply chain at a tactical level on a finite horizon. The main features considered are decentralised decision making and iteration of the planning process on a rolling horizon basis. In each planning process, the actors optimise their local planning and coordinate to achieve a good overall planning. A multi-agent system is used to model such supply chain behaviour. The study is conducted in a divergent two-echelon supply chain with one manufacturer and multiple independent retailers. Coordination is achieved using a standard contract in practice, known as the ‘quantity discount’ contract. The planning framework on the supply chain structure is detailed. Lot-sizing models integrating the quantity discount are presented for the local planning problems. Experimental tests are conducted with three major parameters: quantity discount price, quantity discount breakpoint and rolling horizon length. They are used to determine the quantity discount parameters in achieving the best supply chain profit, and to analyse the increasing profit of the actors. A decision-making tool which is able to consider realistic features of supply chain planning is therefore resulted.     

Coordinating orders in supply chains through price discounts

In this paper, we examine the issue of order coordination between a supplier and multiple retailers in a decentralized multi-echelon inventory/distribution system where the supplier provides a product to multiple retailers who experience static demand and standard inventory costs. Specifically, we propose and analyze a new policy where a manufacturer, who outsources production to an Original Equipment Manufacturer, offers a price discount to retailers when they coordinate the timing of their orders with the manufacturer's order cycle. We show that our proposed policy can lead to more efficient supply chains under certain conditions, and present a straightforward method for finding the manufacturer's optimal price discount in this decentralized supply chain. A numerical experiment illustrates the managerial implications of our model as well as conditions when a manufacturer should consider adopting such a policy.     

Decentralised capacitated planning with minimal-information sharing in a 2-echelon supply chain

This paper aims at modelling decentralised planning at the tactical level, with minimal-information sharing coordination, in a 2-echelon supply chain with multiple actors at each echelon. Suppliers manage production and storage at the upstream echelon, while retailers manage transportation and storage at the downstream echelon. The main features of the planning process are (1) decentralisation and coordination using contracts and sharing of only order/supply proposals, and (2) iteration on a rolling horizon. Actor planning is modelled as a capacitated lot-sizing problem on a finite horizon, with the focus on quality of service. The objective is to minimise costs, with a high lost sales penalty if demand is not met. Two other decision problems are pointed out and modelled with Mixed Integer Programming: (1) lost sales allocation between the retailers when their demands cannot be satisfied; and (2) allocation of orders between the suppliers. A multi-agent system combines simulation of the planning process and optimisation of the local decision processes. Several strategies, including retailers’ beliefs about suppliers’ production capacity are proposed and experimentally tested, with two patterns of production capacities. The results compare the proposed allocation strategies and highlight the relevance of the proposed framework for the studied planning problem.     

Study on the decision-making and coordination of an e-commerce supply chain with manufacturer fairness concerns

The decision-making and coordination of an e-commerce supply chain (ECSC) with manufacturer fairness concerns by incorporating the e-commerce platform into the decision-making process is studied in this paper. An ECSC composed of a single manufacturer and a single e-commerce platform is developed, and the optimal decisions for three scenarios are investigated, namely, a decentralised decision-making model without consideration of fairness concerns, a decentralised decision-making model considering manufacturer fairness concerns, and a centralised decision-making model. Then, a comparative analysis of the optimal decisions of the different models is conducted. On this basis, a coordination mechanism for the decentralised decision-making models is further proposed, and finally, a numerical analysis is employed to verify the conclusions. The research shows that the e-commerce platform, although it is the dominant party, obtains less profit than the manufacturer due to the unique operation characteristics of the ECSC. The sales price, service level, and profit of the ECSC are maximised in the centralised decision-making model, and they are not affected by the commission rate. The sales price, service level and profit of the decentralised decision-making model that considers manufacturer fairness concerns are inferior to those for the model that considers fairness concerns, indicating that manufacturer fairness concerns reduce system efficiency. In addition, a ‘cost sharing joint commission’ contract can be used to coordinate an ECSC.     

Consumer search,transshipment, and bargaining power in a supply chain

We study a decentralised supply chain with one manufacturer and two symmetric retailers who could transship their excess inventory between each other. Without transshipment, the retailer’s unsatisfied customers search and buy the product at the other retailer with some probability. With transshipment, the retailer can transship the other retailer’s excess inventory to fulfil its own unmet demand. However, a transshipment price is often charged by one retailer for transshipping goods to another. We show the retailer’s profit is unimodal in the transshipment price, and the manufacturer’s profit increases in the customer search probability. Although the retailer’s preference over transshipment depends on the magnitude of search probability and transshipment price, the retailer may always prefer the transshipment no matter their magnitude. We then study the effect of bargaining power over the transshipment decision (whether to transship between retailers and at what transshipment price). Our analysis suggests that the manufacturer always prefers to control the transshipment price rather than to control whether to transship, while the retailer can prefer both. We also find that increasing bargaining power always benefits the manufacturer but could hurt the retailer. We finally check the robustness of our results by investigating the case with asymmetric retailers     

Investigating replenishment policies for centralised and decentralised supply chains using stochastic programming approach

In this paper, a multiple period replenishment problem based on (s, S) policy is investigated for a supply chain (SC) comprising one retailer and one manufacturer with uncertain demand. Novel mixed-integer linear programming (MILP) models are developed for centralised and decentralised decision-making modes using two-stage stochastic programming. To compare these decision-making modes, a Monte Carlo simulation is applied to the optimization models’ policies. To deal with demand uncertainty, scenarios are generated using Latin Hypercube Sampling method and their number is reduced by a scenario reduction technique. In large test problems, where CPLEX solver is not able to reach an optimal solution in the centralised model, evolutionary strategies (ES) and imperialist competitive algorithm (ICA) are applied to find near optimal solutions. Sensitivity analysis is conducted to show the performance of the proposed mathematical models. Moreover, it is demonstrated that both ES and ICA provide acceptable solutions compared to the exact solutions of the MILP model. Finally, the main parameters affecting difference between profits of centralised and decentralised SCs are investigated using the simulation method.     

Quick response strategy with cleaner technology in a supply chain: coordination and win-win situation analysis

Quick response strategy (QRS) has been widely adopted in a supply chain where members collect timely market information for better forecasting, and then respond promptly to the market changes by adjusting initial inventory decision. After adopting the QRS, sustainability issues such as greenhouse gas emission and energy waste may be more serious as production lead time is shorter. In this study, due to this dilemma, we develop a two-stage quick response supply chain with cleaner technology, where the manufacturer determines the cleaner technology investment and afterwards the retailer decides the ordering quantity. Based on Bayesian theory, we depict an information updating process for the QRS with cleaner technology. First, we find that the inventory service level significantly affects both manufacturer’s and retailer’s performance under the QRS with cleaner technology. Moreover, our analytical results indicate that the performance of centralised supply chain system is always better than the decentralised one. As a result, we propose two supply chain contracts, minimum ordering quantity (MOQ) and MOQ with buyback (MOQ-BB) to achieve supply chain coordination. Comparing with the MOQ, the MOQ-BB is more flexible to allow better allocation of the ‘additional’ expected profit between the channel members through the buyback price negotiation.     

Single CNC machine scheduling with controllable processing times and multiple due dates

In this study, we solve the single CNC machine scheduling problem with controllable processing times. Our objective is to maximize the total profit that is composed of the revenue generated by the set of scheduled jobs minus the sum of total weighted earliness and weighted tardiness, tooling and machining costs. Customers offer multiple due dates to the manufacturer, each coming with a distinct price for the order that is decreasing as the date gets later, and the manufacturer has the flexibility to accept or reject the orders. We propose a number of ranking rules and scheduling algorithms that we employ in a four-stage heuristic algorithm that determines the processing times for each job and a final schedule for the accepted jobs simultaneously, to maximize the overall profit.     

Pricing and ordering decisions of two competing supply chains with different composite policies: a Stackelberg game-theoretic approach

In today’s global highly competitive markets, competition happens among supply chains instead of companies, as the members of supply chains. So, the partners of the chains seek to apply efficient coordinating strategies like discount, return, refund, buyback, or the other coordinating policies to abate the operation costs of the chains and subsequently increase market shares. Hence, because of the importance and application of these strategies in the current non-exclusive markets, in this study, we introduce different composite coordinating strategies to enhance the coordination of the supply chains. Here, we consider two competing supply chains where both chains launch the same product under different brands to the market by applying different composite coordinating strategies. Each supply chain comprises one manufacturer and a group of non-competing retailers where the manufacturer receives raw materials from an outside supplier and transforms them into a finished product; then, the products are sold to the retailers to satisfy the demands of market. In the first chain, a composite (QFF) policy, which is the combination of quantity and freight discount, as well as free shipping quantity policies, are considered between upstream and downstream members while in the second one, different composite polices are considered between upstream and downstream members such that the supplier offers a composite policy, as the first chain, to the manufacturer and the manufacturer proposes a composite (QPR) policy, which is the combination of quantity discount and partial-refund customer return policies, to the retailers. The main objective of the paper is to determine the optimal selling prices and the order quantities of the manufacturer and the retailers in each chain in presence of different composite coordinating strategies. A Stackelberg game-theoretic approach is employed between the members of each chain where the manufacturer is a follower and the retailers are leaders. The concavity of profit functions is proved. Finally, the applicability of the models is justified by presented numerical examples. Moreover, the effects of these strategies on the decisions of the chains’ partners are examined.     

单生产商和多零售商间的协调机制

通过2个阶段分析了制造商和零售商之间的博弈关系,建立了一个制造商和多个零售商组成的协调机制。给出非合作博弈和合作博弈两种情形下供应链各个成员的利润、零售商的订购量和制造商的批发价等指标的变化情况,并通过一个分配方案对因协调带来的利润进行了合理分配。用一个数值算例,进一步说明此协调机制使供应链的总体期望利润比不协调时增加,而且利润分配方案的实施使供应链成员的利润都得到改善。     

Pricing decisions in closed-loop supply chains with marketing effort and fairness concerns

We investigate closed-loop supply chains (CLSCs) under four reverse channel structures where a central planner, a manufacturer (M), a retailer (R) or a third party (T), respectively, serves as the collector of used product and demand depends on R’s marketing effort. We derive supply chain profitability under both the centralised and decentralised CLSCs and furnish the optimal marketing effort, collection rate and pricing decisions for the supply chain members. We then extend the base models along two directions: the first extension incorporates R’s distributional fairness concerns into the M collection model and the second extension considers potential recycle cost advantages by R and T compared to the M collection model.     

Mitigating global supply chain risks through corporate social responsibility

This paper presents a decision model that captures supply-side disruption risks, social risks, and demand-side uncertainty within an integrated global supply chain and corporate social responsibility (CSR) modelling and analysis framework. The global supply chain decision-makers must decide on the level of investment in CSR activities and the choice of trading partners (manufacturer or retailer) given their CSR consciousness and perceived riskiness in order to maximise profit and minimise their overall risk. The model incorporates individual attitudes towards disruption risks among the manufacturers and the retailers, with the demands for the product associated with the retailers being random. The model allows one to investigate the effects of heterogeneous CSR activities in a global supply chain and to compute the resultant equilibrium pattern of product outputs, transactions, product prices, and levels of social responsibility activities. The results show that CSR activities can potentially be used to mitigate global supply chain risk.