Abstract
This paper investigates a support service supply chain for coordinating with a local third-party logistics provider by arms offset program’s intervention and develops a performance-based contracting framework for the coordinating problem, which remains scarce in the literatures. The performance-based contracting framework evaluates payments and profits for the support service by a game-theoretical approach with principal-agent model. We prove that the proposed framework is an effective tool in acquiring the balance between maximum profit and minimum payment for both parties in the coordinating problem without moral hazard issue. A numerical study consolidates the formulated schemes as contracting preference for both parties’ decision with a higher profit margin at a lower customer’s payment.
Highlights
For a complex system, the system support service supply chain is a common and challenging business in global industries today
Since large numbers of literatures referred to service supply chain optimization, which has been widely measured by performance outcome characteristic such as system availability, this section concentrates on the research tendency in the performance-based contract (PBC) territories in principal-agent based approach and operational availability based approach
We propose a quantitative decision making framework to develop a predictable assessment for solving the unexplored coordinating problem for GP − 3PL service supply chain by the intervention of arms offset program
Summary
For a complex system (e.g., defense systems, transport vehicles, or oil-platforms), the system support service supply chain is a common and challenging business in global industries today. The customers (i.e., the systems’ owner such as governments or enterprises) have developed an interest in coordinating an after-sales supply chain in order to sustain systems’ availability to optimize the support service cost and to enhance competitive capabilities or synergies in economical/social field. The arms offset program becomes an essential condition by offering from the OEM It is a global interactive business driven through the defense OEM (e.g., Boeing or Lockheed Martin) that transfers extra technical or economic benefits to the customer as an incentive mechanism for selling. (1) How do they interact in GP −3PL service supply chain relation by intervention from arms offset program?.
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