Coordination of a two-level supply chain with contracts

In recent years, research on supply chain coordination (SCC) with risk‐averse agents has received much attention. Previous studies are primarily concerned with the coordination of a single manufacturer–single retailer supply chain using different definitions of SCC. What is lacking is a comprehensive analysis of the achievability of SCC. In this paper, we provide a systematic analysis of SCC with risk‐averse agents. We see that three definitions of SCC have been proposed in the literature to investigate SCC with risk‐averse agents, among which the one based on Pareto optimality (PO) stands out. Here we explore the challenges of using the PO criterion. Specifically, we first examine the standard two‐agent supply chain under the mean–variance (MV) and mean‐downside‐risk (MDR) objectives. What we find is that the achievability of PO depends on the contract type. The wholesale price contract even with a side payment may not lead to PO. Also, unlike under MV where risk sharing is Pareto optimal, we observe that the least risk‐averse agent must take all the risk to achieve SCC under MDR. Importantly, we extend our analysis to multiretailer, multimanufacturer, and multitier supply chains. In each case, we characterize the efficient Pareto‐optimal manifold in the multidimensional space and design coordinating contracts that result in Pareto‐optimal actions acceptable to all agents. We also discover that identifying PO across all the contract forms is difficult when some other risk‐aversion criteria are considered. We conclude by providing suggestions and methods for SCC when we are unable to identify PO.

Problem definition: Few papers have explored the impact of price matching negotiation (PM), in which a channel matches its price with the resulting wholesale price bargained by another channel, on firms’ performances, consumer welfare, and social welfare, with and without supply chain coordination. Academic/practical relevance: Negotiation has been widely seen in determining both uniform and discriminatory wholesale prices, which affect outcomes of competitive supply chain practices. Methodology: To characterize the PM mechanism, we use game theory and Nash bargaining theory to compare PM with simultaneous negotiation (SN) through a common-seller two-buyer differentiated Bertrand competition model. Results: Our analysis reveals that PM can benefit the seller but hurt all buyers, which is at odds with some fair wholesale pricing clauses intending to protect buyers. Under coordination with side payments, however, all firms can conditionally benefit more from PM than from SN. Despite firms’ gains, PM leads to less consumer utility and social welfare compared with SN, unless the second buyer in PM is considerably less powerful than the first buyer. Coordination further worsens PM’s negative impact on consumer utility and social welfare. Moreover, the existence of a spot market can increase the wholesale price in PM, hurting buyers, consumers, and society. Furthermore, the qualitative results about PM remain robust under an alternative disagreement point for PM, multiple buyers, and other extensions. Managerial implications: This paper delivers insights on when price matching in supply chain wholesale price negotiation can benefit a seller, buyers, consumers, and society in a variety of scenarios. It advocates how managers can use PM to their own advantages and provides rationale to decision makers for policy regulations regarding wholesale pricing.

Capacity investment in supply chain with risk averse supplier under risk diversification contract

A note on supply chain coordination for joint determination of order quantity and reorder point using a credit option

Designing multi-period supply contracts in a two-echelon supply chain with asymmetric information

Purpose In the hybrid electricity market, renewable energy power generator faces the uncertainty of power market demand and the randomness of the renewable energy generation output. In order to improve the grid-connected quantity of green power, the purpose of this paper is to design the pricing mechanism for renewable energy power generator with revenue-sharing contract in a two-stage “multi-single” electricity supply chain which contains a single dominant power retailer and two kinds of power suppliers providing different power energy species. Design/methodology/approach Considering the dual uncertainties of renewable energy power output and power market demand, the authors design the full-cooperative contract decision-making model, wholesale price contract decision-making model and revenue-sharing contract decision-making model to compare and optimize grid-connected pricing in order to maximize profit of different parties in power supply chain. Then, this paper performs a numerical simulation, discusses the existence of the equilibrium analytical solutions to satisfy the supply chain coordination conditions and analyzes the optimal contract parameters’ variation characteristics and their interaction relationship. Findings The authors find that the expected profits of the parties in the hybrid power supply chain are concave about their decision variables in each decision-making mode. The revenue-sharing contract can realize the Pareto improvement for all parties’ interest of the supply chain, and promote the grid-connected quantity of green power effectively. The grid-connected price will reduce with the increase of revenue-sharing ratio, and this impact will be greater on the renewable energy power. The greater the competition intensity in power supply side, the smaller the revenue-sharing ratio from power purchaser. And for the same rangeability of competition intensity, the revenue-sharing ratio reduction of thermal power is less than that of the green power. The more the government subsidizing green power supplier, the smaller the retailer sharing revenue to it. Practical implications Facing with the dual uncertainties of green power output and market demand and the competition of thermal power in hybrid electricity market, this study can provide a path to solve the problem of renewable energy power grid-connecting. The results can help green power become competitive in hybrid power market under loose regulations. And this paper suggests that the government subsidy policy should be more tactical in order to implement a revenue-sharing contract of the power supply chain. Originality/value This paper studies the renewable energy electricity grid-connected pricing under the uncertainty of power supply and market demand, and compares different contract decision-making strategies in order to achieve the power supply chain coordination. The paper also analyzes the competition between thermal power and renewable energy power in hybrid electricity market.

Agriculture sector plays very crucial role in the economic growth of India. For sustaining its further growth, supply chain of agriculture sector needs to be strengthened. Agriculture sector is facing lot of challenges due to poor infrastructure, unorganised retail market, poor adoption of modern technology and overall inefficient supply chain. There is strong need to develop linkages between farmers and food processors and markets. Lack of coordination is the major problem in food supply chain. It is causing major loss to country as a whole. This study has tried to identify major factors responsible for coordination in the food supply chain. Further, a framework has been developed to quantify the effectiveness of coordination in the supply chain. This has been further illustrated with a case of food supply chain. This framework can be also useful for supply chains from other sectors to quantify its effectiveness and further improve their respective performance.

In the Big Data environment, aims of enterprises investing in Big Data are to gain Big Data information (BDI). To study the decision-making issues of BDI investment and its effects on supply chain coordination, a supply chain with one retailer and one manufacturer was chosen. Meanwhile, considering a company owned the internal BDI and the external BDI, the market demand function was revised and four decision models were proposed from a new perspective. Then, the effects of BDI investment on supply chain members’ benefits under the four models were analyzed and an effectively coordination tactic was presented for achieving supply chain coordination. Results indicated when the investment cost could face a certain threshold, the retailer or the manufacturer investing in BDI could increase its benefits. Meanwhile, there existed “positive externalities” for other supply chain members. In addition, after supply chain members investing in BDI together, revenue-sharing contract could coordinate the supply chain effectively. This article provided a theoretical guidance or a decision basis for companies investing in BDI, meanwhile, it had reference values for supply chain coordination after investing in BDI.

Purpose – The purpose of this paper is to study the strategy development by small and medium enterprises (SMEs) for improving coordination in supply chain in Indian perspective. Globalization and liberalization of the world economy has leveled the field for all competitors around the globe. To face global competition successfully, SMEs have to break isolation of their suppliers and other entities in the supply chain. Design/methodology/approach – For collecting data, a question-based survey was conducted. In total, 251 valid responses were received. Statistical analysis of data acquired from survey is done by one sample t-test, correlation and regression analysis. Findings – Uncertainty of customer order/demand, insufficient knowledge of supply chain management (SCM) and involvement of middlemen in supply chain are the main problems faced by Indian SMEs during implementation of SCM. Quality improvements, delivery on time and cost reduction are the major priorities while forming supply chain strategies. Coordination strategies are positively correlated with business performances. Research limitations/implications – Major implication is that SMEs should develop their strategies effectively after analyzing business environment and future plans. While developing strategies for improving coordination in supply chain of SMEs, they should give due importance to problems and risks they face. However, it is felt that this study can be further explored by considering other aspects of strategy development such as human resource, organization culture, etc. Originality/value – Finding and issues of the paper will be highly useful for SMEs in framing their strategies for improving coordination in supply chain, and academia for further research in the context of changing market scenario.

On the core of the multicommodity flow game

This chapter explores novel ways of improving flexibility, responsiveness, and competitiveness via strategic information technology (IT) alliances among channel members in a supply chain network. To gain competitiveness, firms have to constantly update their operational strategies and information technologies through collaborative efforts of a “network” of supply chain members rather than the efforts of an individual firm. In sum, the foci of this chapter are: (1) an overview of supply chain management (SCM) issues and problems, (2) supply chain coordination and integration, (3) the latest IT applications for improved supply chain performance and coordination, and (4) strategic IT alliances. This chapter concludes with a discussion of business implications and recommendations of future research.

Contributors

For the secondary supply chain composed of a supplier with sufficient funds and a retailer with limited funds and risk aversion, to enhance the supply chain stability and comprehensively improve benefits, the supply chain members may choose to implement a supply chain’s coordination strategy. Thus, we study the following supply chain coordination problems, i.e., the supplier provides a trade credit policy and signs a buyback contract for the surplus products with the retailer. For this, based on maximizing the benefits of supply chain members, the supply chain coordination model has been established. By analyzing two participants’ benefit, the supply chain’s optimum coordination mechanism is obtained. The theoretical results are verified by numerical experiments.

This research investigates the impact of external environment, cognitive factors, and behavioral dimensions in the context of implementing supply chain agility. It applies social cognitive theory to establish a link between various environments including business uncertainty and supply chain disruption risk, cognitive factors such as supply chain agility self-efficacy, trust, and supply chain cooperation, coordination, and communication attitude, and actions such as implementing supply chain agility as well as behavior to explain the decision-making process in implementation. Based on the survey data collected from 254 supply and purchasing managers in the Korean manufacturing industry, AMOS software with structural equation method was used for data analysis Our results support the concept that business uncertainty reduces self-efficacy in supply chain agility although both business uncertainty and supply chain disruption risk boosted trust in the supply chain as well as buyers’ positive attitude toward supply chain cooperation, coordination, and communication. The concept of supply chain agility, self-efficacy, trust, and supply chain cooperation, coordination, and communication attitude have a positive impact on firm performance. Supply chain agility, self-efficacy, and trust in suppliers positively affects implementation of supply chain agility as well as firms’ financial, operational, and supply chain performance. This research provides meaningful insights for considering external environments and cognitive factors while making decisions in implementing supply chain agility.

Theoretical perspectives on the coordination of supply chains