An agent-based negotiation model on price and delivery date in a fashion supply chain

Abstract

Price and due-date negotiation between supply chain members is a critical issue. Motivated by industrial practice, we consider in this paper a make-to-order fashion supply chain in which the downstream manufacturer and the upstream supplier are cooperative on due-date and competitive on price. We propose a two-phase negotiation agenda based on such characteristics, and aim to find an optimal solution to deal with the negotiation problem considering production cost and mutual benefit. We build an analytical negotiation model for a manufacturer-supplier pair, discuss their utilities, and examine the Pareto efficiency frontier from the theoretical perspective. After that, from an application perspective, we build an agent-based two-phase negotiation system where agents are used to represent the two parties to enhance communication. In the cooperative phase, a simulated annealing based intelligent algorithm is employed to help the manufacturer agent and the supplier agent search tentative agreement on due dates which can minimize the total supply chain cost. In the competitive phase, the two parties bargain on the pricing issue using concession based methods. They adjust the reservation value and aspiration value for pricing accordingly based on the integrated utility and the result of the previous phase. Simulation results show that, the proposed negotiation approach can achieve optimal utility of agents and reach a win-win situation for the bilateral parties. Sensitivity analysis is conducted to further generate insights on how different parameters affect the performance of the proposed system.