Abstract
To deal with increasingly competitive challenges, today’s companies consider supplier performance as a crucial factor to their competitive advantage. Supplier development is one of the recent approaches to supplier performance enhancement and consistently requires relationship-specific investments. It is important to invest money, experts and/or machines in a supplier to minimize the risk of an inefficient supply chain while maximizing the level of profitability. This paper provides the number of optimization models to confront this issue utilizing Model Predictive Control. We consider a centralized and distributed setting with two manufacturers and one supplier, which enables us to simulate more realistic scenarios. We implement cooperative and non-cooperative scenarios to assess their impact on the manufacturers’ revenue. Results reveal that the cooperative setting between manufacturers pays off better than non-cooperative and collaborative settings in long-term investments. However, for short-term investments, the non-cooperative setting performs better than the others. We can conclude that, in short-term supplier development investments, an added value is generated since both the manufacturers and the supplier gain flexibility, therefore, investing separately can end up with higher profit for both manufacturers.
Highlights
Manufacturing companies confront procurement costs of raw materials and components of over50% of the companies’ total profit [1,2]
We attempt to answer the following questions: Are collaboration, cooperation, and non-cooperation good scenarios for manufacturers who intend to develop the same supplier by means of dynamic horizon investment? How can cooperative, collaborative, and non-cooperative settings between manufacturers affect the profit of the supply chain in short-term investments?
We investigate the effect of different manufacturer-to-manufacturer relationships on the revenue of supplier development in both short-term and long-term investment
Summary
Manufacturing companies confront procurement costs of raw materials and components of over. The purpose of supplier development is enhancing the performance and/or potentials of the supplier to fulfill the supply needs of manufacturers, such as improvement in response to customer needs and market dynamics, increasing customer responsiveness, improvement of quality and reliability of products, manufacturing of new products, reducing costs of production and to increase profit margins [2,3,4]. Engines and Dell and Hewlett-Packard for personal computers’ PC boards work with the same suppliers [2] In such a situation, a manufacturer can choose between various types of relationships, which can be cooperative, non-cooperative, and collaborative [6]. Collaborative, and non-cooperative settings between manufacturers affect the profit of the supply chain in short-term investments?.
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