Collaborative Planning: Issues with Asymmetric Cost and Hold-Up in Automotive Supply Chains

Abstract

Supply chain optimization has emerged as an important topic in several industries. In the automotive industry supply chains are prevalently composed of independent agents with specific preferences, e.g. distinct firms or profit centers in holdings. In either case, one must expect that no single party has control over the entire chain, and no partner has the power to optimize the whole chain by hierarchical planning. Under such decentralized decisions a way to improve supply chain performance is achievable through coordination and synchronization. The field of collaborative planning offers novel coordination concepts for such situations. We characterize issues in such concepts in automotive supply chains under asymmetric cost allocations. Here, and as well in other industries, few assembly sites (mostly owned by OEM‘s) are linked to multiple suppliers in a converging structure. We find, that under such setting, an iterative negotiation-based process based on counter-proposals is little different to upstream-planning, as local supplier-side savings have comparatively small effects. Further, we study the interaction between collaborative planning and the hold-up problem (i.e. at least one party performs relationship-specific investments), as an additional characteristic in the automotive industry.