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



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.


Unreliable supply Uncertain demand Hybrid push–pull  Supply chain coordination 



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.


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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

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