Supply Chains in Network Economy

Petr Fiala

doi:10.26552/com.c.2003.4.42-46

Abstract

A supply chain can be shown as a set of units interconnected by material, financial, information and decision flows from initial suppliers to ultimate customers. Supply chain management is more and more affected by network business environment and by information and communication technologies. The paper analyzes a combination of non-cooperative and cooperative decision making of supply chains in network economy.

Highlights

Chain management is seen as a governing element in strategy and as an effective way of creating value for customers
Chain management benefits from a variety of concepts that were developed in several different disciplines as marketing, information systems, economics, system dynamics, logistics, operations management, and operations research
The layers of producers and retailers compete in a non-cooperative way but the partners in individual supply chains can profit from cooperative decision-making

Summary

Supply chain management

Chain management is seen as a governing element in strategy and as an effective way of creating value for customers. A structure of supply chains is composed of potential suppliers, producers, distributors, retailers and customers etc. It can be shown that the retailer orders less than the supply chain optimal quantity (x0 Ͼ x*) whenever the producer earns a positive profit and it holds z(x0) Ͼ zr(x*) ϩ zp(x*). Marginal cost pricing (p(1) ϭ c) is one solution to double marginalization problem, but the producer earns a zero profit. The wholesale price p(1) is irrelevant to each firm’s profit and the supply chain earns the optimal profit. To achieve joint optimization of key supply chain decisions, it is preferable that there be a free flow of all relevant information across the entire network. Modeling of supply chains in network economy includes coordination of flows in different network structures and combination of non-cooperative and cooperative decisions.

Network economy environment

Modeling of supply chain networks with e-commerce

Modeling of cooperation in supply chains

Conclusions