Newsvendor model for a dyadic supply chain with Nash bargaining fairness concerns

The paper investigates newsvendor problem for a dyadic supply chain in which both the supplier and the retailer have the preference of status-seeking with fairness concerns. Nash bargaining solution is introduced as the fairness reference point and equilibrium results are derived. The effects of fairness-concerned status-seeking behaviors on optimal decisions as well as channel efficiency are further analyzed. It is shown that the channel efficiency will decrease because of such behavioral preference. The retailer’s share will be larger when the supplier concerns fairness less, and the supplier’s sensitivity to fairness plays a relatively more important role for the channel efficiency. Additionally, another interesting managerial insight is concluded that fairness concerns will not change the status of channel coordination in certain conditions. More specifically, those contracts able (unable) to coordinate fairness-neutral supply chain, based on affine transformations with scale factors within certain ranges, still succeed (fail) to coordinate the fairness-concerned. Furthermore, several insights on bargaining powers are given as well.     

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.     

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.     

Pricing and ordering decisions in a supply chain with imperfect quality items and inspection under buyback of defective items

In this article, the economic production and inventory model in a three-layer supply chain including one distributor, one manufacturer and one retailer for a single-product and general demand functions under three scenarios is developed. We assume that during the production process, both healthy and defective items are generated. As the first scenario, we develop the first model, in which the defective items are not reworked and all considered as scrape, while in the second model, we assume that the defective items are reworked and are sold as perfect item. In the second scenario, we assume that defective item can be sold with lower price than the selling price. Moreover, raw materials with imperfect quality are sent back from a distributor to outside supplier under a lower price. Determining the order quantity of the distributor and the selling prices of the distributor and the manufacturer as well as the retailer was the goal of this article such that the total profit of each member is maximised. In order to solve the models, the Stackelberg approach is employed between the members, and the concavity of the profit functions is proved using several theorems. Then, closed form solutions are derived for the decision variables and a solution algorithm is proposed to determine the optimal solutions. Finally, a numerical example is presented to illustrate the applicability of the model.     

Service capability procurement decision in logistics service supply chain: a research under demand updating and quality guarantee

Though existing researches have already studied on service quality guarantee and demand updating in a supply chain respectively, there is little attention paid to integrated research on service quality guarantee problem with demand updating. This paper aims to investigate the impacts of demand uncertainty revelation and quality guarantee change cost (GCC) on the optimal decisions of logistics service integrator (LSI) and functional logistics service provider (FLSP) in a logistics service supply chain. At the beginning of the first period, the FLSP first guarantees an initial quality level and the LSI procures service capacity from the FLSP based on the demand prediction. Then the demand information is updated after the first-period demand being satisfied, and the LSI and the FLSP make their optimal decisions based on the renewed demand in the next period. Before the second period, uncertainty complete revelation/uncertainty incomplete revelation (UCR/UIR) and GCC/no guarantee change cost (NGCC) may take place, which will affect the decisions the LSI and the FLSP make. Consequently, four situations are considered: (1) UCR and GCC; (2) UIR and GCC; (3) UCR and NGCC; and (4) UIR and NGCC. In each situation, we derive the optimal decisions of the FLSP and the LSI, and a comparison between the first- and second-period decisions in each situation is conducted. Several managerial insights are concluded, and the most important one is that the LSI is supposed to reduce the procurement quantity and the FLSP is supposed to promise a higher quality defect rate in the case of UIR and NGCC. Furthermore, in case of UIR and GCC, we specify a critical condition in which the LSI and the FLSP insist on the initial decisions of the first period. At last, we conducted numerical analysis and gave a practical example of China Yuantong Express Company to support our conclusions.     

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.     

Enhanced joint pricing and lotsizing problem in a two-echelon supply chain with logit demand function

In retail supply chains, ordering and pricing policies for the retailer and shipment plan for the supplier are the most important decisions. These policies are often conducted either individually or sequentially with poor overall performance for the whole supply chain resulting to extra inventory and other deficiencies. In this paper, an integrated marketing-inventory model in a two-echelon supply chain model is developed involving discount promotion, customer behaviour more realistically and operations aspects to determine optimal ordering, shipping and pricing quantities simultaneously. An efficient analytical solution procedure and a Particle Swarm Optimisation solution algorithm are also developed. Finally, a number of numerical tests are conducted to approve the interesting theoretical results of the analytical approach.     

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.     

Pricing and effort decisions for a supply chain with uncertain information

This paper analyses the pricing and effort decisions of a supply chain with single manufacturer and single retailer. The manufacturer produces a kind of product and then wholesales the product to the retailer, who in turn retails it to customers over a single selling season. The retailer can influence demand through her sales effort. This research depicts the consumer demand, the manufacturing cost and the sales effort cost as uncertain variables. Considering the demand expansion effectiveness of sales effort, one centralised and three decentralised game models are built on the basis of the expected value criterion, and the equilibrium solutions are obtained. We investigate the effects of the parameters’ uncertainty degrees on the pricing and effort decisions. The results indicate that the manufacturer benefits from improvement in demand and cost uncertainties when he has at least bargaining power in the supply chain. The results also imply that the uncertainty degree of sales effort elasticity has an outstanding influence on the pricing and effort decisions, whereas the uncertainty degree of price elasticity has a modest impact on these decisions. We also study the effects of the parameters’ uncertainty degrees on the supply chain from the consumers’ perspective. The results suggest that with a power retailer, the retail price should always be on the high end. Consequently, consumers do not necessarily benefit from a power retailer. When the manufacturer and the retailer have equal bargaining power, consumers do not necessarily benefit from the supply chain, either.     

A strategic decision framework for a value added supply chain

Supply chains are becoming increasingly complex. The structure of the supply chain and the suppliers who participate in it are critical decisions for managers. The supply chain is no longer simply a source of inputs or services but an integral source of value added. It is clear that in some cases strategic supply chain objectives may require trade-offs, for example, between cost and innovation capability or between managing risk and maximising flexibility. These decisions balancing trade-offs between desirable partner characteristics are critical and can make a significant contribution to business performance. A framework is outlined, based on the foundation of extant literature, within which firms can make strategic decisions on supply chain structure by categorising the characteristics they prioritise in their supply chain strategy. There is also a strong foundation in the literature on developing mathematical models that provide insight into the decision-making process. A mixed integer programming model is specified that incorporates the opportunity for diversification and provides a demand allocation decision. The model is robust enough to allow for single or diversified supplier strategies based not only on capacity constraints but also on risk pooling and minimum performance requirements for key characteristics that form the basis of the strategy. A Lagrangian relaxation is proposed and satisfactory performance results are provided.     

A strategic model for exact supply chain network design and its application to a global manufacturer

This paper presents a comprehensive model that captures significant strategic decisions involved in designing or redesigning high-performance supply chains from the perspective of the manufacturer. The problem considers deterministic demand by multiple clients, for multiple products, over the periods of a long-term horizon. The design decisions involve selection of suppliers, establishment or resizing of production facilities and distribution centres, possible subcontracting of related activities, and selection of transportation modes and routes. The problem is formulated by a Mixed Integer Linear Programming model. Its objective is to minimise the overall costs associated with procurement, production, inventory, warehousing, and transportation over the design horizon. Appropriate constraints model the complex relationships among the links of the supply chain. The proposed model has been applied to a large case study of a global manufacturing firm, providing valuable insights into the transformation of the firm’s current supply chain network, as well as into the potential of the proposed approach.     

A simulation-optimisation approach for supply chain network design under supply and demand uncertainties

We investigate a three-echelon stochastic supply chain network design problem. The problem requires selecting suppliers, determining warehouses locations and sizing, as well as the material flows. The objective is to minimise the total expected cost. An important feature of the investigated problem is that both the supply and the demand are uncertain. We solve this problem using a simulation-optimisation approach that is based on a novel hedging strategy that aims at capturing the randomness of the uncertain parameters. To determine the optimal hedging parameters, the search process is guided by particle swarm optimisation procedure. We present the results of extensive computational experiments that were conducted on a large set of instances and that provide evidence that the proposed hedging strategy constitutes an effective viable solution approach.     

A dynamic model for serial supply chain with periodic delivery policy

A three-echelon, dynamic lot-sizing model is presented for computing the parameters of a serial supply chain, which consists of integrated material replenishment, production at a capacity constraint, and outbound dispatching with a periodic delivery policy. The model is applicable in the general context of a three-echelon model with capacity constraint at the middle echelon of the serial supply chain which was not considered in most of the literature. This paper addresses a number of structural properties of the model and proposes a polynomial-time algorithm for deriving the optimal solution of minimising the total system costs over the planning horizon. Examples are provided to describe the algorithm.     

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.     

A supply chain network equilibrium model for operational and opportunism risk mitigation

Risk management holds a crucial role in ensuring efficiency, predictability, and coherency in supply chain operations of an enterprise. Risks are associated with every member of a supply chain network. Thus, an end-to-end risk management approach is essential to fortify the entire supply chain network. In this paper, we consider a supply chain network consisting of suppliers, manufacturers, distributors and retailers, as the representative stakeholders. In particular, we take supply chain operational, and opportunism risks into account, and investigate the roles of flexibility, and social relationship, respectively, as a mitigation approach. We develop a multi-period network equilibrium model by considering the stakeholders’ objectives of maximising profit and minimising risk. Further, the finite-dimensional variational inequality formulations are derived for the underlying network optimisation problem. An algorithm, with nice features for computations, is then applied to three simulated examples in order to illustrate the model and computational procedure as well as the types of interventions that can help the strategic decision-makers to explore quantitatively the associated profits and incurred risks in an entire supply chain network.     

Coordination and performance analysis for a three-echelon supply chain with a revenue sharing contract

This paper focuses on a three-echelon supply chain composed of a manufacturer, a distributor and a retailer for a single selling period. Based on a revenue sharing contract, the coordination of the decentralised supply chain with the simultaneous move game or the leader–follower game is analysed. It is determined that the revenue sharing contract can coordinate the decentralised supply chain with the simultaneous move game. Our analysis reveals that the revenue sharing contract cannot coordinate the decentralised three-echelon supply chain with the leader–follower game except for a special situation. However, this result provides an opportunity to develop methodology and results that measure the potential improvement in supply chain performance that can be gained from utilising the revenue sharing contract. This is an important aspect of this paper.     

Demand information sharing and channel choice in a dual-channel supply chain with multiple retailers

In this paper, under a dual-channel supply chain consisting of a manufacturer and multiple retailers, we investigate vertical and horizontal information sharing in different channel structures and the manufacturer’s choice on whether or not to keep a direct channel. To this end, we first study the dual-channel structure where uncertain demand is a linear function of price with a generalised-distribution base demand and show that the retailers have incentives to share information horizontally but not vertically, while the manufacturer is better off with vertical information sharing but its expected profit is not affected by horizontal information sharing. We next examine the retail-channel structure and find the basic results remain unchanged. Finally, we provide closed-form internal and external conditions under which the manufacturer can benefit from owning a dual-channel structure. Our study extends the existing literature by combining information sharing and dual-channel choice, introducing channel difference, discussing the impact of channel structure on horizontal and vertical sharing as well as providing interesting managerial insights for channel choice.     

A closed-loop supply chain with stochastic product returns and worker experience under learning and forgetting

This paper addresses a single-manufacturer single-retailer closed-loop supply chain with stochastic product returns considering worker experience under learning and forgetting in production and inspection of returned items at the manufacturer. Customer demand is assumed to be dependent linearly on the retail price, and it is fulfilled by using both manufactured and remanufactured products. The manufacturer delivers the buyer’s order quantity in a number of equal-sized batches. The optimal number of shipments, the shipment size and the retail price are determined by maximising the average expected profit of the closed-loop supply chain. It is observed from the numerical study that high learning effects in production and inspection lead to high recovery rates of used products, which, besides an economic advantage, may have a positive effect on the environment. Even though forgetting has an adverse effect, the average expected profit of the closed-loop supply chain is much higher than that of the basic model which ignores worker learning.     

Random yield and coordination mechanisms of a supply chain with emergency backup sourcing

This paper considers a supply chain in which a buyer purchases finished items from a contracting supplier to satisfy a stochastic market demand, where the supplier’s production is subject to random yield. We assume that the buyer can make up the shortage by sourcing from an emergency backup supplier. We develop two Stackelberg game models, i.e. buyer-Stackelberg (BS) model and supplier-Stackelberg (SS) model, and find that the decentralised BS model results in a higher stocking factor of supplier’s input than the decentralised SS model. Compared with BS model, the buyer in SS model performs more explicit order plan, and we find that only when the actual yield of the supplier is insufficient, the buyer would use emergency backup sourcing to make up the shortage. When the manufacturing operation of the supplier is in the good state, the buyer only orders a certain amount and has some leftover. When the actual yield of the supplier is moderate, the buyer uses up every item produced from the supplier regardless of the yield rate. Comparing both channel structures, SS operation is a more effective way of controlling both inventory cost and backup sourcing cost, and it can be beneficial for each player as well as for the whole channel. Finally, we develop the coordination mechanism for each channel to investigate the issues of risk handling and risk sharing for uncertain demand and uncertain yield.     

A hybrid VNS-HS algorithm for a supply chain scheduling problem with deteriorating jobs

This paper investigates a coordinated scheduling problem in a two stage supply chain where parallel-batching machine, deteriorating jobs and transportation coordination are considered simultaneously. During the production stage, jobs are processed by suppliers and there exists one parallel-batching machine in each supplier. The actual processing time of a job depends on its starting time and normal processing time. The normal processing time of a batch is equal to the largest normal processing time among all jobs in its batch. During the transportation stage, the jobs are then delivered to the manufacturer. Since suppliers are distributed in different locations, the transportation time between each supplier and the manufacturer is different. Based on some structural properties of the studied problem, an optimal algorithm for minimising makespan on a single supplier is presented. This supply chain scheduling problem is proved to be NP-hard, and a hybrid VNS-HS algorithm combining variable neighbourhood search (VNS) with harmony search (HS) is proposed to find a good solution in reasonable time. Finally, some computational experiments are conducted and the results demonstrate the effectiveness and efficiency of the proposed VNS-HS.