Supplier credit guarantee loan in supply chain with financial constraint and bargaining

This paper adopts a multiunit bilateral bargaining framework on financial decision. In a two-echelon supply chain, the supplier sells products through a financial constraint retailer. If needed, the retailer gets a short-term financing from a bank by supplier credit guarantee loan (CGL). Through applying the Nash bargaining framework, we formulate two-level game models, i.e. Retailer-Supply System negotiation and Supplier-Bank negotiation. In this paper, we study and discuss the equilibrium order quantity which is affected by initial working capital and interest rate, the retailer-supply system negotiation and upstream wholesale price effects for supply chain performance, the supplier-bank negotiation and interest rate decisions with different capital markets. The results show: (i) there exists loan size limit for financial constraint retailer under CGL. (ii) The upstream wholesale price increase will weaken retailer’s bargaining position, and the supply system may gain or lose depending on the bargaining power. (iii) There exists unique equilibrium sharing ratio in supply system, which means CGL can achieve risk sharing. (iv) Within a supply system, the upstream wholesale price advantage will weaken bank’s profit, whereas supplier may gain or lose depending on his bargaining power.     

Coordinating a three-level supply chain with quantity discounts

Numerous examples exist that illustrate how companies enjoying a strong position in a supply chain unilaterally dictate terms to their suppliers and/or their customers. This paper suggests a mechanism by which a company can coordinate its purchasing and production functions and create an integrated plan that dictates order and production quantities throughout a three-firm channel. Specifically, we model a company that attempts to dictate channel lot sizes by obtaining a quantity discount from its supplier while offering perhaps a different one to its customer. Previous quantity discount research has examined supply chains consisting of only two levels, a seller and a buyer. This paper considers a three-level chain (supplier–manufacturer–retailer) and explores the benefits of using quantity discounts on both ends of the supply chain to decrease costs. We show that incorporating quantity discounts into both ends of the supply chain can significantly decrease costs compared to concentrating only on the lower end. Furthermore, the results of the decentralized procedure described here are robust vis-à-vis a centralized decision-making procedure.     

Coordinating supply chain decisions: an optimization model

Coordinating information and material flows are key to effective supply chain management. The complexity of interactions in and the uncertainties surrounding supply chains make such coordination difficult. However, coordination can be realized by optimizing the flows in supply chains with analytical approaches. A mixed integer programming model is presented to support the tactical decisions of ordering, producing and transporting under various conditions of information availability at the loci of decision making. The model is applied to a modified version of MIT's well known Beer Distribution Game. The performance of the modeling approach is contrasted with the results of human decision making under identical conditions and underlines the enormous potential for performance improvement analytical decision support can provide. Several methodological aspects for coping with the difficulties of solving rather large mixed integer models are presented and it is shown that they can contribute significantly in dealing with the inherent computational problems.     

Coordinating a three-layer supply chain with uncertain demand and random yield

The paper considers a three-layer supply chain involving one raw-material supplier, one manufacturer and one retailer. The market demand is assumed to be stochastic and productions at the raw-material supplier and manufacturer are subject to random yield. The centralised model is studied as the benchmark case. The decentralised model is solved and Nash equilibrium solutions are obtained. It is shown that buyback contract fails to coordinate such a supply chain. However, a composite contract framed combining buyback, and sales rebate and penalty contracts is shown to coordinate the supply chain. Numerical examples are provided to illustrate the developed models.     

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.     

Coordinating a trust-embedded two-tier supply chain by options with multiple transaction periods

Trust widely works in supply chain practices and deeply affects supply chain decisions. Full trust in transactions and inaccurate demand forecasts are most likely to lead to biased decisions and low supply chain performances. Therefore, we propose a trust updating model to quantify decision-maker’s trust. The model presents the variation of trust over time and is helpful to evaluate decision-maker’s trust level in each transaction. In the model, a coordination mechanism with contract is designed to mitigate each supply chain partner’s ordering risk. Optimal order strategies of both manufactures and retailers in a supply chain under a bidirectional option contract are analysed in this paper. We find the manufacturer’s optimal production quantity is positively affected by penalty price in the contract and its bounds are given by simulation analysis. Our findings in this paper indicate that the proposed coordination mechanism with bidirectional option contract is profitable to all supply chain partners in long-term transactions. Meanwhile, the coordination mechanism helps the supply chain partners to catch up with marketing fluctuations and enhances the supply chain trust and partnerships. Finally, some simulation experiments are employed to obtain more observations.     

Generally configured supply chain with flexible local control strategies

We consider a supply chain that comprises manufacturing stations, distribution stations and retail stations. A manufacturing station consists of a limited input buffer, a machine, a limited output buffer, a set of kanbans and a vehicle. A distribution or retail station consists of a limited storage buffer and a vehicle. A manufacturing station can choose any one of two mechanisms, buffer and kanban, to control its work-in-process, whereas that in a distribution or retail station is controlled only by a buffer mechanism. A vehicle can choose either a push or pull policy for transporting items from other stations to its own station. The supply chain is generally configured, which means that a vehicle can go to more than one station for transporting items rather than to a single upstream station. A manufacturing station can be controlled under a flexible strategy such as a push policy and buffer mechanism (push/buffer), or a push/kanban, or a pull/buffer or a pull/kanban, whereas a distribution or retail station can be under a push/buffer or a pull/buffer. Then, a global control strategy of the supply chain is formed by combining all local control styles. Such a supply chain is modelled as a queuing network. A decomposition approach is developed for major performance measures such as the throughput of each station and the work-in-process in each station. The efficiency of the decomposition approach is evaluated by comparing numerical experiments with simulations.     

Coordinating a supply chain under uncertain demand and random yield in presence of supply disruption

A two-echelon supply chain involving one manufacturer and one retailer for a single product is considered in this paper. The end customers’ demand is assumed to be random. The production of the manufacturer is subject to random yield, and there is a possibility of supply disruption in which case no item from her can reach the retailer. The retailer has a backup supplier who is costlier but perfectly reliable, and is having a limit up to which he may deliver. In addition to placing an order to the manufacturer, the retailer is allowed to reserve a quantity from the backup supplier in the ordering period; he may buy up to the reserved quantity after realising actual market demand in the trading period. Aiming at studying the effects of the various uncertainties involved in the chain on the optimal decisions, we develop and analyse centralised and decentralised models. We also propose a contract mechanism to coordinate the chain and find threshold conditions for which the coordinated model would collapse. Numerical examples are provided to illustrate the developed model.     

The value of trade credit with rebate contract in a capital-constrained supply chain

We investigate the value of an innovative trade credit with rebate contract (TCRC) model in a stylised supply chain. In this supply chain, the capital-abundant manufacturer offers an integrated contract involving trade credit, minimum ordering and sales rebate contract to a capital-constrained retailer. To highlight the value of the TCRC model, we compare it with a traditional trade credit financing (TTCF) model in a ‘selling to the newsvendor model’. First, we show that equilibrium strategies exist between the manufacturer and the retailer under the TCRC or TTCF model. Second, this study investigates equilibrium selection between the TCRC and TTCF models for the individual and the supply chain. Finally, we show the manufacturer’s pricing policy, wherein the TCRC model outperforms the TTCF model for the players. Furthermore, we conduct a set of numerical experiments to show evidence for theoretical analysis and measure the operation efficiency of the TCRC model for players in the supply chain.     

Equilibrium markup pricing strategies for the dominant retailers under supply chain to chain competition

Markup pricing policies have been widely employed in the retailing industry. Under such policies, a retailer requires a retail margin over the wholesale price charged by the supplier to guarantee her profitability. This paper investigates and compares the performance of two commonly used markup pricing policies, namely, fixed-dollar markup and percentage markup, for the dominant retailers facing chain-to-chain competition. Our results demonstrate that the equilibrium pricing strategy for the dominant retailers seeking to maximise their respective profits is [PP]-strategy (i.e. both retailers select the percentage markup pricing policy), no matter what the demand curve and the level of chain-to-chain competition are. Unfortunately, this equilibrium will get in the prisoner’s dilemma since the percentage markup pricing strategy might yield lower profits for the retailers and suppliers compared to its fixed-dollar counterpart when the level of chain-to-chain competition is high enough under the linear demand, which is contrast to the literature. If the criteria for the dominant retailers to select which markup pricing policy to offer is the whole channel’s profit obtained under the decentralised decision-making scenario instead of themselves, [PP]-strategy is the dominant strategy and the unique Nash equilibrium of the pricing policy choice game regardless of the competitive intensity under the iso-elastic demand. This result holds true for the linear demand only when the level of chain-to-chain competition is below certain threshold; otherwise, both [FF] (i.e. both retailers select the fixed-dollar markup pricing policy) and [PP] can be the equilibrium pricing strategy.     

A pricing/ordering model for a dyadic supply chain with buyback guarantee financing and fairness concerns

The paper investigates pricing/ordering issues in a dyadic supply chain, in which a core supplier sells products through a budget-constrained retailer. The retailer faces stochastic demand and is fairness-concerned as well. If needed, the retailer can get financing support from bank by means of buyback guarantee financing (BGF) mode, which is often used in China. By introducing Nash bargaining solution as the fairness reference point, we formulate the retailer’s fairness-concerned utility function and develop a two-echelon pricing/ordering game model. We then study the combined impacts of fairness concerns and BGF on two members’ equilibrium strategies and supply chain performance. We also discuss the corresponding issues under no budget constraint, no financing service and bank financing. Our results show that: (1) two members’ equilibrium strategies are significantly influenced by the retailer’s fairness-concerned behaviour and initial budget; (2) as compared to no budget constraint, BGF can bring the whole supply chain more performance, which means that BGF can yield value-added; (3) When the retailer takes the risk of uncertain market solely, the retailer’s fairness concerns are beneficial for supply chain to improve the performance.     

Development of novel strategies for designing sustainable Indian agri-fresh food supply chain

Traditional Indian agri-fresh food supply chain (AFSC) is unorganized and controlled by a large number of intermediaries, causing it to be unsustainable from the farmer (low profitability) to the customer (not getting quality product even after paying a high price). The purpose of this paper is to propose novel strategies for designing a sustainable Indian AFSC. Authors identify shortcomings as well as strengths, weaknesses, opportunities and threats (SWOT) of the Indian agriculture system through the literature survey. To improve overall performance of this chain, authors have developed eighty strategies by incorporating SWOT into TOWS (threat, opportunity, weakness and strength) matrix. They define four key objectives to mitigate the afore-mentioned problems. In this paper, twelve strategies are shortlisted from existing ones on the basis of fulfilling a maximum number of objectives. The shortlisting of strategies is further verified by evaluating strategies using performance measures (PMs) in sustainability dimensions, which revealed that the twelve chosen strategies dominate over other strategies. The shortlisted strategies are mainly focused on improving the economic dimension of AFSC by satisfying maximum number of objectives and PMs. The chosen strategies pledge for the optimum and most feasible ones to be recommended for managers/researchers towards redesigning the AFSC. The proposed viable strategies are expected to reform the conventional Indian AFSC by designing sustainable supply chain (SSC). The outcomes of this work will provide clear guidelines for researchers and policy makers to make sustainable agriculture.     

Metrics for supply chain sustainability

Most interpretations of sustainable development recognise that there are constraints on long-term human activities imposed by material and energy availability and by the capacity of the planet to accommodate wastes and emissions; inter- and intra-generational equity within these constraints is then an ethical principle underlying sustainability. This leads to identifying three dimensions of sustainable development: techno-economic, ecological and social. This paper reviews the development of indicators to reflect these three dimensions, applicable to industrial sectors, companies and broad groups of products or services. Indicators of environmental and economic performance are relatively well established. They can be combined to indicate the sustainability of products, services and supply chains. Indicators of social performance are more problematic, particularly indicators to describe the social value of products and services. Cases from the process, petroleum and petrochemicals, electronics and fast moving consumer goods sectors are reviewed, showing that social indicators must be developed through public participation.     

Sustainable supply chains for supply chain sustainability: impact of sustainability efforts on supply chain risk

Supply chain managers across the globe are finding it difficult to manage the increasingly complex supply chains despite adopting a variety of risk mitigation strategies. Firms on the other hand have also been adopting various kinds of environmental and social sustainability practices in recent times to reduce carbon footprint and improve their image on the social front. However, very few studies in the extant literature have examined the impact of sustainability practices on supply chain risk. We address this important gap in literature by empirically testing this relationship, using primary data from six manufacturing sectors and 21 different countries including developed as well as emerging markets across the globe. Our findings indicate that risk mitigation strategies do not always reduce the actual supply chain risk experienced by firms, whereas sustainability efforts help reduce supply chain risk, especially in emerging market contexts. In addition, we find that, while reactive risk mitigation strategies on their own fail to reduce supply chain risk, they are effective when used in conjunction with sustainability efforts. We also find that preventive risk mitigation efforts are only effective in mature supply chains such as the OECD countries.     

Fuzzy QFD for supply chain management with reliability consideration

Although many products are made through several tiers of supply chains, a systematic way of handling reliability issues in a various product planning stage has drawn attention, only recently, in the context of supply chain management (SCM). The main objective of this paper is to develop a fuzzy quality function deployment (QFD) model in order to convey fuzzy relationship between customers needs and design specification for reliability in the context of SCM. A fuzzy multi criteria decision-making procedure is proposed and is applied to find a set of optimal solution with respect to the performance of the reliability test needed in CRT design. It is expected that the proposed approach can make significant contributions on the following areas: effectively communicating with technical personnel and users; developing relatively error-free reliability review system; and creating consistent and complete documentation for design for reliability.     

Pricing decisions for a supply chain with refurbished products

This paper considers a supply chain consisting of a supplier and a retailer where a fixed portion of new products sold will be returned to the retailer and then be repaired and resold as refurbished products at a lower price. Using the utility model, we formulate how consumers will make their choices when facing both new and refurbished products. Then, using the divide-and-conquer method, we derive the supplier and retailer's equilibrium decisions, including the supplier's wholesale price and the retailer's prices for both the new and refurbished products. The main findings include the following. First, refurbished products will be sold in the market only when the refurbishing cost is small. In this situation, as the refurbishing cost increases, most of the negative impact on the retailer will be transferred to the supplier. Second, in the same condition, as the refurbishing cost increases, the wholesale price and retail price of the new product will change in opposite directions. This result contrasts with the traditional pass-through effect. Third, when the repair cost is moderate, the retailer will eventually not sell refurbished products, but its profit can be significantly improved and the double marginalisation effect can be mitigated.     

Policy mechanisms for supply chain coordination

The problem is to determine a review period and stocking policy that are mutually beneficial to a producer and a retailer. In our model, the retailer uses a periodic review, base stock policy for ordering the item from the producer's Distribution Center (DC). Excess customer demand is assumed to be lost. A make-to-order production system supplies to the DC. We show that given a review period, unless the manufacturer agrees to share the cost of carrying a fraction of the safety stocks at the retailer, the two will not agree upon the level of stocks to be carried in the store. We prove that there is an equilibrium value for this fraction, such that the retailer and the manufacturer are always in agreement with regard to the stocking level. We then show that complete coordination on the stocking level as well as the review period can be achieved solely through carrying out negotiations on credit terms. These theoretical results are used to construct an algorithm for calculating the optimal policy parameters for a supply chain. As part of the analysis we suggest a modification of the base stock policy for the positive lag lost sales case of periodic review inventory models that consistently outperforms the base stock policy in our numerical studies.     

Joint pricing and inventory strategies in a supply chain subject to inventory inaccuracy

This paper focuses on pricing strategies, inventory policies for a supply chain when Radio Frequency Identification (RFID) technology is adopted to cope with inventory inaccuracy. The supply chain consists of one supplier and one retailer, in which the RFID tag price is shared between the supplier and the retailer. We present and compare the performance differences between a wholesale price contract and a consignment contract when the retailer is the Stackelberg leader and the supplier is the follower. Based on the optimal pricing and inventory decisions, an interesting observation of contract selection is that there are two critical values of inventory available rate such that when the inventory availability is less than the lower value, both the supplier and the retailer prefer a consignment contract; when the inventory availability is greater than the upper value, a wholesale price contract is their best choice; when the inventory availability is between the two values, the supplier prefers a wholesale price contract and the retailer prefers a consignment contract. Additionally, there exist threshold values of RFID tag price and sharing rate to determine the contract preference for the retailer. Furthermore, the profits of both the supplier and the retailer are independent of the RFID tag price sharing rate in a wholesale price contract, and the supplier has the incentive to invest in RFID tag cost in a consignment contract.     

Multi-level supply chain network design with routing

Recently, the multi-level and multi-facility industrial problem in supply chain management (SCM) has been widely investigated. One of the key issues, central to this problem in the current SCM research area is the interdependence among the location of facilities, the allocation of facilities, and the vehicle routing for the supply of raw materials and products. This paper studies the supply chain network design problem, which involves the location of facilities, allocation of facilities, and routing decisions. The proposed problem has some practical applications. For example, it is necessary for third party logistics (3PL) companies to manage the design of the network and to operate vehicle transportation. The purpose of this study is to determine the optimal location, allocation, and routing with minimum cost to the supply chain network. The study proposes two mixed integer programming models, one without routing and one with routing, and a heuristic algorithm based on LP-relaxation in order to solve the model with routing. The results show that a developed heuristic algorithm is able to find a good solution in a reasonable time.     

Evaluating the effects of capacity constraints and demand patterns on supply chain replenishment strategies

This research considers inventory replenishment in a stochastic, multi-echelon supply chain involving both production and distribution functions. Simulation is used to compare distribution/material requirements planning (DRP/MRP), re-order point (ROP) and Kanban (KBN) replenishment strategies. Additional experimental factors include the demand pattern and the existence of manufacturing capacity constraints. Trade-off curves between inventory and delivery performance are generated. Statistical techniques, including analysis of variance (ANOVA), are then used to compare the areas under the trade-off curves and determine the relative dominance among the replenishment strategies. The methodology is used to identify both main and interaction effects. With seasonal demand, DRP/MRP performance is found to be best, followed by ROP and KBN, respectively. Without seasonal demand, the relative performance ranking depends on the presence of capacity constraints. Without capacity constraints, ROP performs best, followed by DRP/MRP and KBN. With capacity constraints, the ranking is reversed. This difference in behaviour can be explained using queuing analysis.