Supply coordination based on bonus policy in assembly under uncertain delivery time

The existing research of supply coordination under uncertain delivery time mainly focuses on the collaboration between the supplier and the manufacturer, which aim at minimizing the total cost of each side and finding comparative optimal solutions under decentralized decision. In the supply coordination, the collaboration between suppliers in assembly system is usually not considered. As a result, the manufacturer’s production is often delayed due to mismatching delivery of components between suppliers. Therefore, to ensure supply coordination in assembly system, collaboration between suppliers should be taken into consideration. In this paper, an assembly system with two suppliers and one manufacturer under uncertain delivery time is considered. The model is established and optimal solution is given under decentralized decision. Furthermore, the cost functions of two suppliers are both convex, and a unique Nash equilibrium exists between two suppliers. Then the optimal decision under supply coordination is analyzed, which is regarded as a benchmark for supply coordination. Additionally, the total cost of the assembly system is jointly convex in agreed delivery time. To achieve supply coordination a bonus policy is explored in the assembly system under uncertain delivery time, and the total cost under bonus policy must be lower than under decentralized decision. Finally the numerical and sensitivity analysis shows the cost of assembly system under bonus policy equals that under supply coordination, and the cost of each side in assembly system under bonus policy is lower compared to that under decentralized decision. The proposed research minimizes the total cost of each side with bonus policy in assembly system, ensures the supply coordination between suppliers and the manufacturer, and improves the competiveness of the whole supply chain.