Single Supplier Research Articles

A mathematical modelling approach for managing sudden disturbances in a three-tier manufacturing supply chain

This paper aims to develop a recovery planning approach in a three-tier manufacturing supply chain, which has a single supplier, manufacturer, and retailer under an imperfect production environment, in which we consider three types of sudden disturbances: demand fluctuation, and disruptions to production and raw material supply, which are not known in advance. Firstly, a mathematical model is developed for generating an ideal plan under imperfect production for a finite planning horizon while maximizing total profit, and then we re-formulate the model to generate the recovery plan after happening of each sudden disturbance. Considering the high commercial cost and computational intensity and complexity of this problem, we propose an efficient heuristic, to obtain a recovery plan, for each disturbance type, for a finite future period, after the occurrence of a disturbance. The heuristic solutions are compared with a standard solution technique for a considerable number of random test instances, which demonstrates the trustworthy performance of the developed heuristics. We also develop another heuristic for managing the combined effects of multiple sudden disturbances in a period. Finally, a simulation approach is proposed to investigate the effects of different types of disturbance events generated randomly. We present several numerical examples and random experiments to explicate the benefits of our developed approaches. Results reveal that in the event of sudden disturbances, the proposed mathematical and heuristic approaches are capable of generating recovery plans accurately and consistently.

Pricing and ordering decisions in a supply chain with downward substitution and imperfect process yield

We consider a manufacturer sourcing from two suppliers of asymmetric component quality and producing a quality-differentiated product, namely a low- and high-quality version, with each having deterministic demand. The manufacturer adopts the existing process to produce low-quality products with components from the supplier with low component quality, and develops a new process to produce high-quality products with components from the supplier with high component quality. The new process has imperfect yield, and products that do not meet the specifications for high-quality products can substitute for low-quality products produced with the existing process. We investigate the suppliers’ price decisions and the manufacturer’s ordering and production decisions in a game-theoretical model under dual sourcing. Our analyses reveal that increasing product differentiation or higher yield of high-quality products do not necessarily translate to a higher profit for the manufacturer. In light of the manufacturer’s sourcing strategies, we show that sourcing from a single supplier with high- and low-quality components yields a lower profit than sourcing from one supplier with high component quality and the other with low component quality. Finally, we investigate the manufacturer’s decision-making with endogenous yield rate of high-quality products. Our analyses demonstrate that the manufacturer benefits from setting the yield rate of high-quality products ahead of the suppliers’ price decisions.

Pengendalian Persediaan Produk Obat Herbal pada Permintaan Probabilistik Menggunakan Joint Economic Lot Size

Integration in supply chain is an important factor to consider. Good integration between entity in supply chain can give some advantages from minimize cost to competitiveness between supply chain. Company X is manufacturer of herbs medicine which has single distributor to sell the product. Currently, manufacturer and distributor have their inventory control policies and there is no coordination among echelon. It causes the difference number of production lot from manufacturer and the number of order from distributor, consequently total inventory cost become expensive.This research will propose Joint Economic Lot Size (JELS) method that can integrate these two echelons and will give the minimum total inventory cost. The proposed JELS method is integration between Cardenas-Barron model about EPQ backorder and Ben-Daya and Hariga model about integration model between single supplier and single consumer. Calculation process begin with forecasting demand, calculation of actual inventory control at echelon manufacturer and distributor, and calculation of proposed method. The result of calculation process show that total actual inventory cost is 5.500.371,476 IDR/month and the proposed method give 4.604.766,665 IDR/month. The proposed method can give saving about 895.604,811 IDR/month or 16,28%. Key words: cost, integration, JELS, inventory

Revisiting the Tension Between Classical Liberalism and the Welfare State

A classical liberal market order relies on competition which, in a neoliberal perspective, should be supported by a government regulating the admissible degree of market power. Market competition itself is seen as an engine of innovation and growth. The downside of such a classical liberal market order is a lack of economic security for market participants. It is the very core of such an order that it enforces consumer sovereignty, but the demand articulated by consumers vis-à-vis single suppliers can be volatile. In this article, we revisit the classical liberal debate on means of providing economic security. We then discuss the problem in a contractarian framework that allows for conflicts between individual absolute values. We argue that political institutions that facilitate an open debate on these conflicting values are essential, and that attempts to derive optimal sizes of welfare states in a technocratic fashion are futile.

Contingency Inventory Reservation for Low-Probability High-Impact Events

This article investigates reservation contracts for contingency inventory management between two buyers and a single supplier under a game theoretic framework. Two channel structures are considered in this context. In the first setting, the buyers simultaneously move to offer reservation fees to the supplier, who in turn, decides on the inventory amount she wants to carry for each buyer. In the second setting, the supplier moves first and offers nonrefundable-deductible reservation fees for the buyers, who respond with their respective reservation quantities. By reserving through a shared supplier, the buyers enable a contingency inventory pool which alleviates overage risk for the supplier and enables availability of products after low-probability high-impact events. Conditions for successful implementation of contingency reservation contracts are investigated. The results obtained for both channel structures were contrasted. It is shown that in a market where the buyers have more negotiation power, reservation contracts are more likely to achieve inventory buildup under relatively lower event probabilities.

Excess procurement strategies by a dominant buyer under constrained supply

AbstractSupply chains are often characterized by the presence of a dominant buyer purchasing from a supplier with limited capacity. We study such a situation where a single supplier sells capacity to an established and more powerful buyer and also to a relatively less powerful buyer. The more powerful buyer enjoys the first right to book her capacity requirements at supplier's end, and then the common supplier fulfills the requirement of the less powerful buyer. We find that when the supplier's capacity is either too low (below the lower threshold) or too high (above the higher threshold), there is no excess procurement as compared to the case when supplier has infinite capacity. When the supplier's capacity is between these two thresholds, the more powerful buyer purchases an excess amount in comparison to the infinite capacity case.

How Precious Are Scarce Products? An Experimental Study on a Turn‐and‐Earn Allocation Mechanism

ABSTRACTIn this study, we conduct laboratory experiments to analyze a turn‐and‐earn allocation mechanism by which a single supplier allocates scarce products to two identical retailers. Under this mechanism, the supplier uses past sales to dynamically allocate scarce capacity among downstream retailers. The experimental data show that retailers strategically and systematically order more than predicted by standard theory. We find that the psychological scarcity effect is an important phenomenon. Using cognitive hierarchy theory, we develop a behavioral model to consider the scarcity effect, which causes retailers to place additional value on the allocations in a supply‐shortfall period. Using structural estimation, we show that retailers perceive scarce products as being more precious than the standard theory predicts, and exhibit an average of 2.7 reasoning steps during strategic interactions. Moreover, the retailers exhibit social rejoice preference. They are more likely to make myopic decisions when the degree of scarcity is relatively low. Comparing with the proportional allocation mechanisms by an additional experiment, we find that the turn‐and‐earn mechanism is more beneficial to the supplier but less to the retailers.

Values of food leftover sharing platforms in the sharing economy

For many food products, such as fresh vegetable and fruit, proper handling of product leftovers is critical. In recent years, food leftover sharing (FLS) platforms that can provide a means to collect the unsold food products from individual retailers and create values from them have emerged. Motivated by this real world observation, we build a single supplier multi-retailer analytical supply chain model to explore the value of this kind of FLS platform. In the decentralized supply chain setting, we prove that the presence of FLS platform is beneficial to the retailers, the supplier, the consumers and the environment. Whether it benefits the supply chain economically depends on the logistics costs (incurred from the food product leftover collection by the FLS platform). We extend the analysis to the case with a centralized supply chain and show that the FLS platform is guaranteed to help improve the environment, but the consumers and the supply chain are only benefited when the logistics costs are sufficiently small. Sensitivity analyses are conducted which show that for both centralized and decentralized supply chain settings, the FLS platform is especially helpful in enhancing social welfare when the unit food product leftover cost is higher, the unit benefit derived from reusing the food product leftovers is higher, or the unit logistics cost is lower. We further consider the case when the logistics cost with the use of platform is high, propose the use of government sponsors to help and provide the conditions under which this sponsor is well-justified with respect to social welfare enhancement.

Dynamic Relational Contracts for Quality Enforcement in Supply Chains

We model the interaction of a single buyer with a single supplier within a market in a developing country with homogeneous local suppliers and homogeneous buyers from developed nations. The buyer sources a product from a supplier and then inspects and sells it on the market, subject to quality standards such as regulations about chemical content. Suppliers decide how much effort to exert to ensure compliance with quality standards. Buyers are assumed to comply with contracts because they are based in countries with strong legal systems. We assume that legal enforcement of the supplier’s contractual obligations is not possible. We model the interaction between buyer and supplier as a repeated game in which the partnership can be terminated by the buyer if the supplier refuses to pay penalties for quality violations. After termination, the buyer and supplier each search for a new business partner. We model the interaction between buyer and supplier using relational contacts in which penalties for quality failures are set so that the supplier voluntarily pays them. We show that optimal relational contracts have dynamic form in this setting because the value of the outside option available to the parties, if the relationship is terminated, is determined by the contract terms. We characterize the properties of the optimal dynamic equilibria and analyze the use of third-party quality certifications within this framework. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2990 . This paper was accepted by Martin Lariviere, operations management.

Pass-Through of Cost Reductions in Open Auction Markets with Application to Merger Effects

Here we analyze how, in an open procurement auction, cost reductions among suppliers bidding to sell to a buyer affect the payoffs to the buyer and suppliers. When a single supplier enjoys a reduction in cost, its increase in expected payoff is equal to the expected increase in total surplus from the cost reduction. The buyer benefits not by capturing a portion of the increase in surplus but instead gains at the expense of the suppliers who do not enjoy the cost decrease. The buyer's benefit from a cost decrease, increases in the concentration among the suppliers who do not enjoy the cost decrease. These results have implications for vertical integration and merger analysis. Increases in concentration increase the incentive of buyers who are integrated upstream to make cost reducing investments in the supply of the good while the investment incentives of non-integrated suppliers remain unchanged. In terms of merger analysis these results suggest that pass through of merger specific cost savings will be higher if the non-merging firms in the market are more concentrated. In addition, mergers increase the incentives for vertically integrated sellers to make cost reducing investments, which may serve to mitigate the anticompetitive effects of a merger.

Integrated optimization of material supplying, manufacturing, and product distribution: Models and fast algorithms

Motivated by applications in electroplating industry, we study an integrated optimization problem of production and logistics for a manufacturer and a third-party logistics (3PL) provider. The objective is to minimize the total cost which includes costs in transportation and inventory of materials, manufacturing, and inventory and outbound distribution of products. The materials are semi-products supplied by a single supplier, and the transportation of materials are accomplished by a 3PL provider. Semi-products may have different sizes and processing times, and they are processed on a batch-processing facility by the manufacturer. Outbound distribution of final products are accomplished by the same 3PL provider. We consider three different models and propose fast algorithms to solve each model. In the first model, semi-products have identical sizes and an optimal algorithm is proposed. In the second model, semi-products have identical processing times and an approximation algorithm is proposed. The algorithm has absolute and asymptotic worst case ratios of 1.5 and 1.223, respectively. In the third model, semi-products have arbitrary sizes and processing times and an approximation algorithm is proposed. The absolute and asymptotic worst case ratios of the algorithm are 2.181 and 2, respectively. The running time of the optimal algorithm of the first model is O(nlog n), while that of the approximation algorithms are O(n2).

Supplier Diversification Under Buyer Risk

When should a firm diversify its supply base? Most extant theories attribute supplier diversification to supplier risk. Herein, we develop a new theory that attributes supplier diversification to buyer risk. When suppliers are subject to the risk of buyer default, buyers may take costly action to signal creditworthiness so as to obtain more favorable terms. But once signaling costs are sunk, buyers sourcing from a single supplier become vulnerable to future holdup. Although ex ante supply base diversification can be effective at alleviating the holdup problem, we show that it comes at the expense of higher up-front signaling costs. We resolve the ensuing trade-off and show that diversification emerges as the preferred strategy in equilibrium. Our theory can help explain sourcing strategies when risk in a trade relationship originates from the sourcing firm, for example, a small-to-medium enterprise or a start-up; a setting that has eluded existing theories so far. This paper was accepted by Terry Taylor, operations management.

Актуальные вопросы закупок «малого объема» у единственного поставщика

Актуальные вопросы закупок «малого объема» у единственного поставщика

Channel coordination using options contract under simultaneous price and inventory competition

In this paper we demonstrate that options contract coordinates single supplier - multiple buyer supply chain network and can eliminate channel conflict stemming from simultaneous price and inventory competition. We show that a pure strategy unique Nash equilibrium exists for buyers’ game and the supplier is able to coordinate the entire supply chain. Our analysis further indicates that options contract provides the supplier with better flexibility in terms of profit allocation compared to buyback contract. We identify a key limitation of this contract: it can coordinate a supply chain only with a limited number of buyers.

Integrated Inventory-Transportation Problem in Vendor-Managed Inventory System

The paper presents a two-echelon inventory-transportation problem in Vendor Managed Inventory (VMI) system. We consider a distribution system composed with single supplier, single distribution center and multiple retailers. Single kind of products are required to deliver from the manufacturer through distribution center to the retailers within soft time window. The objective of the problem is to minimize total logistics cost in the distribution network, including inventory cost, distribution cost, and time penalty cost. The upper echelon model focuses on minimizing inventory cost while the lower echelon model on vehicle routing problem. A mixed algorithm is designed to solve the problem with simulated annealing and ant colony with local search. The solution of upper and lower echelon model are substituted into each other based on the mixed algorithm step by step to get the optimization solutions. Computational experiments are executed to compare the performance of independent and integrated inventory-transportation optimization from the dimension of to verify the effectiveness of the model and the algorithms.

Policies Adoption for Supply Disruption Mitigation Based on Customer Segmentation

Supply chain disruptions resulted from various disasters may cause awesome loss; therefore, corresponding operational policies should be designed to mitigate the negative effect. In industrial goods supply chain, customers are segmented and have different contributions and significances to manufacturers, which have to be considered when adopting mitigation policies. From the customer heterogeneity perspective, the models of a three-stage supply chain with a single supplier and two suppliers are established, and sensitivity analysis is carried out to investigate scenario parameters' impact on optimal mitigation policies. The numerical experiments find that safety stocks are suitable for low disruption probability situation. Meanwhile, strategic reserves with lower holding cost are attractive and efficient to handle a fairly highly disruptive situation or high key customer loss. The results also indicate backup supplier should be adopted if there is a low disruption probability or the backup supplier's price is not significantly higher. This paper extends the supply disruption research and leads some managerial implications and insights that might be useful for disruption mitigation in industrial goods supply chain.

An optimal policy for three-tier supply chain for processing an agricultural product with a stochastic demand

Agricultural products are very common in our daily life. A few works limited to a two-tier supply chain (SC) of these products, have been carried out by controlling their management cost. This study develops a threetier SC model of processing an agricultural product with a stochastic demand, consisting of a single seasonal supplier, a single manufacturer and multiple retailers. A safety stock is maintained to meet extra demand. The objective is to identify the number of shipments and the shipment sizes in a cycle to be delivered to the manufacturer and the retailers in order to minimise the chain-wide cost. We develop two optimal solution methods to the model. These methods and the parallel multiple jumps technique used to find integer solutions are summarised in an algorithm to obtain global optimal solutions to the concerned problems. Managerial insight of this model is highlighted with a numerical illustration.

Supply chain coordination under interruption based on supplier group evaluation

Supply chain disruption may bring huge blows to supply chain members. With the expansion of the enterprise scale, the original single supplier model has gradually become a supplier group model, and retailer's evaluation of the supplier group will have an impact on the retailer's decision. The increase in the status of the retailer has led retailers to impose more penalties on disrupted suppliers. Therefore, it is necessary to study the coordination problem of the supply chain when there is a supplier group's evaluation of the retailer and the supplier has the possibility of disruption. On this basis, this paper introduces the revenue sharing + second penalty contract and option contract, and compares the two contracts to provide guidance for contractual choices for supply chain members.

Retailer-led supply chain contract coordination with supplier group evaluation

With the expansion of the enterprise scale, the original single supplier model has gradually evolved into a supplier group model. The evaluation of the retailer by the supplier group will have a certain impact on the retailer's decision. At the same time, as the status of retailers increases, retailers gradually grasp the dominance of the supply chain and use their channel advantages to charge channel cost to suppliers. Therefore, it is necessary to study the coordination problem of the supply chain when there is a supplier group's evaluation of the retailer and the retailer is dominant. This paper establishes the supply chain coordination decision model under the stackelberg game model and finds that the wholesale price contract and the traditional revenue sharing contract cannot achieve the overall optimal supply chain.

Supply chain coordination under interruption based on supplier group evaluation

Supply chain disruption may bring huge blows to supply chain members. With the expansion of the enterprise scale, the original single supplier model has gradually become a supplier group model, and retailer's evaluation of the supplier group will have an impact on the retailer's decision. The increase in the status of the retailer has led retailers to impose more penalties on disrupted suppliers. Therefore, it is necessary to study the coordination problem of the supply chain when there is a supplier group's evaluation of the retailer and the supplier has the possibility of disruption. On this basis, this paper introduces the revenue sharing + second penalty contract and option contract, and compares the two contracts to provide guidance for contractual choices for supply chain members.