Annals of Operations Research

, Volume 257, Issue 1–2, pp 537–557 | Cite as

Coordinating a decentralized hybrid push–pull assembly system with unreliable supply and uncertain demand

Article

Abstract

We consider a decentralized assembly system in which \(m+n\) unreliable suppliers sell complementary components to an assembler, who faces a random demand. We assume that \(m\) of these suppliers are more powerful than the assembler and sell components via push contracts, while the remaining \(n\) suppliers are less powerful than the assembler and sell components via pull contracts. The supply chain operations are modelled by a three-stage game. We first characterize the equilibrium decisions of all chain members, and find that supply chain efficiency depends heavily on system parameters. We then develop a mechanism to coordinate the supply chain. The mechanism consists of two policies, including a buyback policy between push suppliers and the assembler, and a subsidy policy between the assembler and pull suppliers. We show that the mechanism can eliminate the two sources of “double marginalization” that exist in the chain with unreliable supply and uncertain demand, and achieve Pareto improvements.

Keywords

Unreliable supply Uncertain demand Hybrid push–pull  Supply chain coordination 

Notes

Acknowledgments

The authors are grateful to the constructive comments of the editor and two anonymous referees. The authors also gratefully acknowledge the support of grants from (i) National Natural Science Foundation of China (No. 71272129) for D.B. Ni and H. Fu; (ii) National Natural Science Foundation of China (No. 71471029) for Y.K. Ma and H. Fu; and (iii) Program for New Century Excellent Talents in University (NCET-11-0064), and Sichuan Youth Science and Technology Foundation (No. 2013JQ0031) for D.B. Ni.

References

  1. Altug, M. S., & van Ryzin, G. (2013). Product quality selection: Contractual agreements and supplier competition in an assemble-to-order environment. International Journal of Production Economics, 141(2), 626–638.CrossRefGoogle Scholar
  2. Anupindi, R., & Akella, R. (1993). Diversification under supply uncertainty. Management Science, 39(8), 944–963.CrossRefGoogle Scholar
  3. Aviv, Y., & Federgruen, A. (2001). Capacitated multi-item inventory systems with random and seasonally fluctuating demands: Implications for postponement strategies. Management Sciences, 47(4), 512–531.CrossRefGoogle Scholar
  4. Barlow, R. E., & Proschan, F. (1965). Mathematical theory of reliability. New York: Wiley.Google Scholar
  5. Bernstein, F., DeCroix, G. A., & Wang, Y. (2007). Incentives and commonality in a decentralized multiproduct assembly system. Operations Research, 55(4), 630–646.CrossRefGoogle Scholar
  6. Cachon, G. (2003). Supply chain coordination with contracts. In S. Graves & T. de Kok (Eds.), Handbooks in operations research and management science: Supply chain management. Amsterdam: North Holland Press.Google Scholar
  7. Cachon, G. P. (2004). The allocation of inventory risk in a supply chain: Push, pull, and advance-purchase discount contracts. Management Science, 50(2), 222–238.CrossRefGoogle Scholar
  8. Cheng, F., Ettl, M., Lu, Y., & Yao, D. D. (2012). A production-inventory model for a push–pull manufacturing system with capacity and service level constraints. Production and Operations Management, 21(4), 668–681.CrossRefGoogle Scholar
  9. Du, D., Chen, B., & Xu, D. (2014). Quantifying the efficiency of price-only contracts in push supply chains over demand distributions of known supports. Omega, 42(1), 98–108.CrossRefGoogle Scholar
  10. Fang, X., Ru, J., & Wang, Y. (2014). Optimal procurement design of an assembly supply chain with information asymmetry. Production and Operations Management, 23(12), 2075–2088.CrossRefGoogle Scholar
  11. Gerchak, Y., & Wang, Y. (2004). Revenue-sharing vs. wholesale-price contracts in assembly systems with random demand. Production and Operations Management, 13(1), 23–33.CrossRefGoogle Scholar
  12. Ghosh, S., & Gagnon, R. J. (1989). A comprehensive literature review and analysis of the design, balancing and scheduling of assembly systems. International Journal of Production Research, 27(4), 637–670.CrossRefGoogle Scholar
  13. Granot, D., & Yin, S. (2008). Competition and cooperation in decentralized push and pull assembly systems. Management Science, 54(4), 733–747.CrossRefGoogle Scholar
  14. Grosfeld-Nir, A., & Gerchak, Y. (2004). Multiple lotsizing in production to order with random yields: Review of recent advances. Annals of Operations Research, 126, 43–69.CrossRefGoogle Scholar
  15. Güler, M. G., & Bilgic, T. (2009). On coordinating an assembly system under random yield and random demand. European Journal of Operational Research, 196(1), 342–350.CrossRefGoogle Scholar
  16. Jiang, L., & Wang, Y. (2010). Supplier competition in decentralized assembly systems with price-sensitive and uncertain demand. Manufacturing & Service Operations Management, 12(1), 93–101.CrossRefGoogle Scholar
  17. Kalkancı, B., & Erhun, F. (2012). Pricing games and impact of private demand information in decentralized assembly systems. Operations Research, 60(5), 1142–1156.CrossRefGoogle Scholar
  18. Lariviere, M. A. (2006). A note on probability distributions with increasing generalized failure rates. Operations Research, 54(3), 602–604.CrossRefGoogle Scholar
  19. Nagarajan, M., & Sošić, G. (2009). Coalition stability in assembly models. Operations Research, 57(1), 131–145.CrossRefGoogle Scholar
  20. Sošić, G. (2011). Impact of demand uncertainty on stability of supplier alliances in assembly models. Production and Operations Management, 20(6), 905–920.CrossRefGoogle Scholar
  21. Simchi-Levi, D., & Simchi-Levi, E. (2001). The effect of e-business on supply chain strategy. Working paper, MIT.Google Scholar
  22. Tomlin, B. (2009). Impact of supply learning when suppliers are unreliable. Manufacturing & Service Operations Management, 11(2), 192–209.CrossRefGoogle Scholar
  23. Tomlin, B., & Wang, Y. (2005). On the value of mix flexibility and dual sourcing in unreliable newsvendor networks. Manufacturing & Service Operations Management, 7(1), 37–57.CrossRefGoogle Scholar
  24. Yin, S. (2010). Alliance formation among perfectly complementary suppliers in a price-sensitive assembly system. Manufacturing & Service Operations Management, 12(3), 527–544.CrossRefGoogle Scholar
  25. Zabel, E. (1970). Monopoly and uncertainty. The Review of Economic Studies, 37(2), 205–219.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.School of Management and EconomicsUniversity of Electronic Science and Technology of ChinaChengduChina
  2. 2.Department of Systems Engineering and Engineering ManagementThe Chinese University of Hong KongShatinHong Kong

Personalised recommendations