Supply chain coordination with two-part tariffs under information asymmetry

Supply chain coordination literature indicates that two-part tariff contracts cannot coordinate a supply chain with a supplier and a retailer under information asymmetry, but can coordinate the channel under full information, while leaving the retailer zero profit. Motivated by the practice of Costco Business Centres, we incorporate customer heterogeneity, near-saturated retail market and asymmetric information into a stylised model. The retailer has the knowledge of customer heterogeneity while the supplier does not. The supplier, on the other hand, designs a menu of two-part tariffs for the retailer to choose from. We have found that two-part tariffs can coordinate the supply chain under asymmetric information, while leaving the retailer a positive profit. In addition, a one-size-fits-all two-part tariff can coordinate the supply chain at equilibrium, i.e. there is no need for the supplier to design different two-part tariffs for the retailer who may possess different types of information.     

Supply chain management using put option contracts with information asymmetry

We study the problem of hedging demand uncertainty in a supply chain consisting of a risk-neutral supplier and a risk-averse retailer under a buyback contract. We use semi-variance of the possible profit values as a measure of the retailer’s risk attitude. We first study the setting where the supplier can observe the risk type of the retailer and find that in this case the supplier can design a buyback contract that extracts the maximum profit for the supplier. When the retailer’s type is unobservable, a new contract needs to be designed (the ‘option buyback contract’) and we show that in this case the retailers will self-select and chose an order quantity that maximises the total supply chain profit. Through numerical computations, we analyse the dynamics between the benefits of hedging risk, information rent and the retailer’s type, and outline cases when, depending on the shape of the reservation utilities of the retailers, it is too costly for the supplier to manage risk. In conclusion, our results show that whereas semi-variance has appealing properties as a measure of risk, its use introduces analytical challenges that can only be overcome through numerical computation.     

Supply chain coordination under information asymmetry: a review

Aligning supply chain decisions of separate entities with independent objectives can be considered to be one of the difficulties of supply chain management. This difficulty becomes worse if the supply chains are characterised by an asymmetrical distribution of information. Although considerable research has recently been devoted to supply chain coordination, less attention has been paid to different information asymmetry settings to the mechanisms underlying it. This research attempts to help fill this gap by reviewing and classifying the literature based on supply chain features, applied methodology, coordination mechanisms, and types of information asymmetry. The proposed classification is used to highlight the ongoing issues in the area and identify the direction for future research.     

An event-driven manufacturing information system architecture for Industry 4.0

Future manufacturing systems need to be more flexible, to embrace tougher and constantly changing market demands. They need to make better use of plant data, ideally utilising all data from the entire plant. Low-level data should be refined to real-time information for decision-making, to facilitate competitiveness through informed and timely decisions. The Line Information System Architecture (LISA), is presented in this paper. It is an event-driven architecture featuring loose coupling, a prototype-oriented information model and formalised transformation services. LISA is designed to enable flexible factory integration and data utilisation. The focus of LISA is on integration of devices and services on all levels, simplifying hardware changes and integration of new smart services as well as supporting continuous improvements on information visualisation and control. The architecture has been evaluated on both real industrial data and industrial demonstrators and it is also being installed at a large automotive company. This article is an extended and revised version of the paper presented at the 2015 IFAC Symposium on Information Control in Manufacturing (INCOM 2015). The paper has been restructured in regards to the order and title of the chapters, and additional information about the integration between devices and services aspects have been added. The introduction and the general structure of the paper now better highlight the contributions of the paper and the uniqueness of the framework.     

The value of information systems for product recovery management

This article sheds light on the role of information systems in product recovery management. We first develop analytical models and then provide a numerical example to determine under what conditions investments in Information-intensive Product Recovery Systems (IPRS) are economically justifiable for manufacturers and when policy-makers need to consider facilitating their implementation. The results of the analytical models indicate that the recovery network (collection) structure and product characteristics determine if precision improvements or increased sorting speed associated with IS investments will lead to higher profit gains. Manufacturers should carefully assess conflicting impacts of current manufacturing and recycling technology trends on the value of IPRS. Implementing IPRS might end up reducing manufacturers' profits under a highly time efficient decentralised collection structure. We show that negotiations with competitors about IPRS implementation may lead to a win–win situation and allow consumers to enjoy the lowest product price if the binding force of the agreement is strong. Otherwise, some manufacturers follow free-rider strategies. This article has immediate application to manufacturers' IS strategy and to government policy-makers considering investing in and/or structuring product recovery closed-loop supply chain processes within their jurisdictions. It also opens a potential stream of research concerning the role of IPRS to automate, informate and transform closed-loop supply chains for eco-efficiency.     

Improving the design phase through interorganisational product knowledge models

This paper focuses on the use of interorganisational knowledge models with the purpose of standardising engineer-to-order (ETO) products. Such product variant reductions can lead to decreased costs for both the ETO company and its suppliers without reducing sales. In spite of the attention that supply chain integration has received in the literature, supply chain integration with a focus on the integration of product knowledge in ETO companies and their suppliers has not received much attention. Thus, the purpose of this paper is to define this type of supply chain integration. The concept is investigated by a case study, which supports the claim that supply chain product knowledge integration is an approach for increasing the competitiveness of ETO companies and their suppliers. Given the gap in the literature, the paper may potentially open a new horizon for studying supply chain integration.     

SHARED: An information model for cooperative product development

One fundamental issue in developing collaborative engineering systems is the representation of product information which supports communication and coordination. This product information includes not only the geometric and physical properties of the product and its parts, but also information about functions, constraints and the design rationale. In this paper, we describe an information model, SHARED, which was developed for encoding product information in DICE, a distributed and integrated environment for computer-aided engineering. SHARED provides multiple levels of both functional and geometric abstractions, multiple views and techniques for maintaining consistency between the various abstractions and views. These elements are essential for a good representation model of product information. The use of the SHARED model is illustrated through an example, depicting the various representations of a product as it evolves through the design process. The SHARED model has been implemented over a distributed OODBMS as a toolkit/framework for developing environments which need to model, manipulate and communicate product information between distributed cooperating applications, while supporting coordination between them.     

New flexibility drivers for manufacturing,supply chain and service operations

Increasing product proliferation, customisation, competition and customer expectations, as well as supply side disruptions, pose significant challenges to firm operations. Such challenges require improved efficiency and resilience in manufacturing, service and supply chain systems. New and innovative flexibility concepts and models offer a prospective route to such operational improvements. Several emerging issues in flexibility, such as risk and uncertainty management, environmental sustainability, optimal strategies under competition, optimal operations with strategic consumer behaviours are being examined in this regard. This overview provides a concise review of these critical research issues, and discusses related papers featured in this special issue. Four major flexibility drivers are classified: disruption risks, resilience and the ripple effect in the supply chain; digitalisation, smart operations and e-supply chains; sustainability and closed-loop supply chains; and supplier integration and behavioural flexibility.     

Review of supply chain configuration and design decision-making for new product

The nature of competitive markets continuously pushes manufacturers to develop new products to meet the increasingly diversified customer demands. Manufacturers thus have to handle the complexities generated during the total life cycles of various product types, from product design to procurement, production, marketing and recycling. Though some management practices in mass customisation help to improve the performance of manufacturing systems, there are still some fundamental problems not covered. Joint decision-making of product and supply chain design, for example, is one of them. The existing industrial practice tends to treat these two problems separately. Decoupling these two problems decrease the design complexity but may lead to suboptimal decision outcome. To enhance understanding of the interconnected decisions for supply chain management and product design, this review collects related literature on this topic and focuses on the analysis of existing papers from an operation research perspective.     

An approach for estimating the end-of-life product disassembly effort and cost

Disassembly is the process of physically separating a product into its parts or subassembly pieces. The overall economics of the disassembly process, and in particular the cost to disassemble, is still not well understood. In this paper our goal is to introduce a methodology that will support and facilitate the economic analysis of the disassembly activity. We present a multi-factor model to compute the disassembly effort index (DEI) score, which is representative of the total operating cost to disassemble a product. The DEI score can then be compared against the projected market value of the disassembled parts and subassemblies to get an economic measure. To develop the DEI model we surveyed a variety of commercial disassembly facilities. Based on these surveys we propose a multifactor weighted estimation scheme. The seven factors are (i) time, (ii) tools, (iii) fixture, (iv) access, (v) instruct, (vi) hazard, and (vii) force requirements. The DEI scale is defined in the 0 to 100 range. This range is assigned on a weighted basis to each of the seven factors. For each factor, an independent utility scale is formulated, using the assigned range as anchors. Using a conversion scale the DEI score is used to derive an estimate of disassembly cost and the disassembly return on investment. An example is presented.     

A framework for cost evaluation in product service system configuration

Configuration systems are increasingly used as a means for efficient design of customised product service systems (PSS) to satisfy diverse customer needs. Cost evaluation is thereby important to assist the configuration engineers in making decisions on feasible configuration solutions. However, little research attention has been received until recently. To fill this gap, this paper contributes in developing a framework for cost evaluation in PSS configuration. A holistic view of PSS configuration, the three-dimensional PSS cost element, and a life cycle-oriented cost evaluation approach are successively proposed. The framework is thereby established with a number of parts, including the preparatory stage, the evaluation stage and the configuration stage. A pump PSS is illustrated to validate the developed framework. Four feasible configuration solutions in one configuration activity are evaluated and compared. The configuration engineers are thus assisted with the decision on selecting the one with the least cost.     

An integrated product service system modelling methodology with a case study of clothing industry

Product-service system (PSS) is a business model designed to help enterprises achieve servitisation. PSS not only considers service-oriented logic to increase product value but also supports enterprises with waste reduction. An increasing number of studies have emphasised PSS development. However, much of the literature remains focused on separate development phases, such as idea generation or a specific product or industry application. An integrative system modelling methodology designed to help companies formulate a complete scenario is absent. This study provides a methodology for developing a systematic and complete PSS strategy. It combines failure modes and effects and importance-performance analysis to identify potential customer needs. A service-product development matrix and a product-service life cycle analysis are developed. Following the service concepts generation, grey relational analysis and scenario analysis are utilised to evaluate the alternatives. A case study involving the clothing industry was conducted to test the proposed approach. Results indicate the methodology can help service providers identify existing problems and develop service alternatives systematically. These alternatives can then be evaluated and the scenario which achieves the highest profitability, is the most environmental friendly, and is the most social friendly can be identified.     

Characteristics affecting management of design information in the production system design process

Although it has been argued that the design of production systems is crucial, there is a general lack of empirical studies analysing and identifying resources and capabilities required for an efficient production system design process. One of these resources is the critical role attributed to design information and one such capability is how the design information is managed. To address this research gap, this paper reports the results from two in-depth case studies in the automotive industry focusing on the management of design information in the production system design process. Our results show that design information management needs to be understood as a multidimensional concept having three dimensions: acquiring, sharing and using design information. By focusing on the three dimensions, six characteristics affecting the management of design information when designing the production system are identified. The characteristics are information type, source of information, communication medium, formalisation, information quality and pragmatic information.     

两个零售商环境下数量柔性契约研究

在综合国内外研究成果的基础上,借鉴以单个供应商和单个零售商组成的两级供应链的研究,形成以单个供应商与两个零售商的两阶段供应链为基本研究对象,通过数字解析方法和量本利分析方法对供应链契约中常用的数量柔性契约进行分析。证明了这种灵活订货模型可以协调供应商和零售商之间的决策行为,使得供应链的整体利润达到最优,为多零售商的复杂供应链的研究提供参考。     

回购契约下应对突发事件的供应链协调策略

在基本回购契约模型基础上,分析了回购契约下实现供应链协调的条件,并针对突发事件造成零售商面临的需求分布变化时供应链协调被打破的问题,提出了具有抗突发事件性的回购契约。这个契约主要将增加的供应商成本考虑进回购价格,使得供应商新增加的成本能够在供应商和零售商之间分配,从而使新的回购契约实现对突发事件的协调应对。应用一个算例对比加以说明。     

Inventory decision-making models for a closed-loop supply chain system

In this paper, we investigate how buyers’ and suppliers’ distinct perceptions of technology uncertainty affect the relationship between communication frequency and supplier performance. Information processing theory suggests that a fit is desirable between perceived environmental uncertainty and the communication processes between organisations. However, if partners in a buyer-supplier relationship do not concur on the high level of technology uncertainty, it is highly questionable whether increased communication will be effective in increasing supplier performance. Using dyadic data from 86 buyer-supplier relationships, involving 388 respondents, we found that communication frequency was positively related to supplier performance only when both suppliers and buyers perceived high levels of technology uncertainty. When buyers perceived greater technology uncertainty than their suppliers, communication frequency was negatively related to supplier performance. The findings in this study show that it is important to take the distinct perceptions of buyers and suppliers of technology uncertainty into account when assessing the effects of communication frequency. It appears that increased communication is only effective when both parties acknowledge the need to communicate, and can be unfavourable when only one party sees the benefits of it.     

Integrating failure analysis and risk analysis with quality assurance in the design phase of medical product development

Today, manufacturing operates as a global network, which has created more awareness of the quality of products and services. A systematic and rational way of managing quality assurance is currently lacking. This can cause serious problems in sectors such as the medical industry, as product failure may not only cause time delays, but also create risks for the health and safety of patients and users. This paper proposes a quality assurance approach that incorporates risk analysis (based on ISO14971) and failure analysis (based on FMEA) into the product design phase to assure product quality in the short term and facilitate global manufacturing practices in the long run. The proposed approach includes a Markov model to predict product failure from a customer perspective, which serves as a checkpoint for feedback to provide a basis for quality assurance. A medical equipment firm is used as a test-bed to illustrate how the proposed approach works and to verify its effectiveness.     

Proactive environmental strategies and performance: role of green supply chain processes and green product design in the Chinese high-tech industry

Though many firms still believe that passive environmental strategies are sufficient, it is pertinent that they move beyond this belief and take a proactive supply chain-wide environmental stance so as to create a sustainable environment. In this paper, we seek to extend current work within green supply chain management by considering multiple green supply chain capabilities and performance measures. We hypothesise the linkage between environmental orientation, green supply chain capabilities and performance by drawing upon stakeholder theory and natural resource-based view. More importantly, our study is the first to distinguish between product and process-related capabilities in the green supply chain area and study their direct and mediating role with respect to environmental and financial performance measures. Using survey data collected from 256 Chinese-based high-tech firms, we analyse several hypothesised relationships. Our results provide strong support for the significant role that green product design and green supply chain processes can play in improving firms’ environmental and financial performance. Interestingly, our results also suggest that green product design may not have a direct impact on financial performance.     

Agile supply chain strategy and supply chain performance: complementary roles of supply chain practices and information systems capability for agility

The paper examines the mediating effect of supply chain (SC) practices on the relationship between agile supply chain (ASC) strategy and SC performance. It further examines the moderating effect of information systems (IS) capability for agility on this mediated relationship. Using the theoretical lenses of complementarity and the information processing view of the supply chain, we hypothesise that strategic supplier partnership, customer relationship, postponement and lean practices, mediate the relationship between ASC strategy and SC performance. We further hypothesise that IS capability for agility moderates each of these mediated relationships. We empirically test the hypotheses using survey data from members of senior and executive management in the logistics/supply chain functions of 205 firms. The paper contributes to the literature on ASCs by theoretically explaining and empirically demonstrating how SC practices and IS capability for agility act together to effect a positive relationship between ASC strategy and supply chain performance.     

Optimal ordering policy for a price-setting newsvendor with option contracts under demand uncertainty

In this article, we investigate the newsvendor problem in a joint ordering and pricing setting in the presence of option contracts under demand uncertainty. At the beginning of a single selling season, the newsvendor who faces additive stochastic demand can obtain goods through two ways: ordering from a firm or purchasing and exercising call options. Single ordering (ordering from a firm only or purchasing and exercising call options only) and mixed ordering (ordering from a firm and purchasing and exercising call options simultaneously) cases are investigated. We find that the newsvendor’s optimal pricing and ordering strategies exist and are unique for both cases, respectively. In addition, when both cases are available, mixed ordering is the newsvendor’s optimal ordering policy. If only single ordering is available, the newsvendor prefers ordering from a firm when demand risk is low, while enjoys purchasing and exercising call options when demand risk is high. We also find that with option contracts, the newsvendor’s optimal order quantity and maximum expected profit are all decreasing in the option price and exercise price of product, while the optimal retail price in terms of option price and exercise price of product are intricate. Moreover, we show that, mixed ordering is more capable to deal with supply price volatility risk.