Supply Chain Cooperation by Agreed Reduction of Behavior Variability: A Simulation-based Study
Abstract
Supply chain echelons normally base their operational decisions on average values of the parameters that depend on other members. However, in real-life operation the variability of said parameters decreases the link profits. Thus, a cooperative arrangement may be devised in which a link agrees to reduce the variability of its behavior to enhance the performance of other links, receiving compensation in return. This work shows the application of simulation and decision trees to assess the feasibility of this cooperation scheme, from the perspective of the central link of a three member supply chain. First, the operational parameters of the link are optimized for mean values of the variables set by adjacent members. Then, by simulating the system for different probability distributions of these variables, graphs of the expected link gain versus the variances of the distributions are plotted. The results are incorporated to decision trees to evaluate the collaboration feasibility. It was found that the increased variability of the behavior of one neighboring member decreases the benefit of lowering the variability of the behavior of the other. The manuscript closes with a discussion of the practical viability of this collaboration scheme.
Keywords:
Supply chain, uncertainty, collaboration, simulationDownloads
References
S. Chopra, P. Meindl, Supply Chain Management, Third Edition, Pearson Education, 2007
C. Harrell, B. K. Ghosh, R. O. Bowden, Simulation Using Promodel, Third Edition, Mc Graw Hill, 2012
X. Fang, C. Zhang, D. J. Robb, J. D. Blackburn, “Decision support for lead time and demand variability reduction”, Omega, Vol. 41, pp. 390-396, 2013 DOI: https://doi.org/10.1016/j.omega.2012.03.005
J. Banks, J. S. Carson II, B. L. Nelson, D. M. Nicol, Discrete Event System Simulation, Fifth Edition, Pearson Education, 2010
W. G. Qu, Z. Yang, “The effect of uncertainty avoidance and social trust on supply chain collaboration”, Journal of Business Research, Vol. 68, No. 5, pp. 911-918, 2015 DOI: https://doi.org/10.1016/j.jbusres.2014.09.017
J. Luo, A. Y. -L. Chong, E. W. T. Ngai, M. J. Liu, “Green Supply Chain Collaboration implementation in China: The mediating role of guanxi”, Transportation Research Part E: Logistics and Transportation Review, Vol. 74, pp. 37-49, 2015 DOI: https://doi.org/10.1016/j.tre.2014.12.010
J. Luo, A. Y. -L. Chong, E. W. T. Ngai, M. J. Liu, “Green Supply Chain Collaboration implementation in China: The mediating role of guanxi”, Transportation Research Part E: Logistics and Transportation Review, Vol. 71, pp. 98-110, 2014 DOI: https://doi.org/10.1016/j.tre.2014.09.005
D. J. -F. Jeng, “Generating a causal model of supply chain collaboration using the fuzzy DEMATEL technique”, Computers and Industrial Engineering, Vol. 87, pp. 283-295, 2015 DOI: https://doi.org/10.1016/j.cie.2015.05.007
E. Ciancimino, S. Cannella, M. Bruccoleri, J. M. Framinan, “On the Bullwhip Avoidance Phase: The Synchronised Supply Chain”, European Journal of Operational Research, Vol. 221, No. 1, pp. 49-63, 2012 DOI: https://doi.org/10.1016/j.ejor.2012.02.039
R. Cigolini, M. Pero, T. Rossi, A. Sianesi, “Linking supply chain configuration to supply chain performance: A discrete event simulation model”, Simulation Modelling Practice and Theory, Vol. 40, pp. 1-11, 2014 DOI: https://doi.org/10.1016/j.simpat.2013.08.002
R. Guillaume, C. Thierry, B. Grabot, “A decision support tool for procurement planning process under uncertainty”, IFAC Proceedings Volumes, Vol. 44, No. 1, pp. 1590-1595, 2011 DOI: https://doi.org/10.3182/20110828-6-IT-1002.01342
R. Guillaume, B. Grabot, C. Thierry, “Management of the risk of backorders in a MTO–ATO/MTS context under imperfect requirements”, Applied Mathematical Modelling, Vol. 37, Nos. 16–17, pp. 8060-8078, 2013 DOI: https://doi.org/10.1016/j.apm.2013.03.019
R. Guillaume, G. Marques, C. Thierry, D. Dubois, “Decision support with ill-known criteria in the collaborative supply chain context”, Engineering Applications of Artificial Intelligence, Vol. 36, pp. 1-11, 2014 DOI: https://doi.org/10.1016/j.engappai.2014.06.013
O. Kwon, G. P. Im, K. C. Lee, “MACE-SCM: A multi-agent and case-based reasoning collaboration mechanism for supply chain management under supply and demand uncertainties”, Expert Systems with Applications, Vol. 33, No. 3, pp. 690-705, 2007 DOI: https://doi.org/10.1016/j.eswa.2006.06.015
O. Kwon, G. P. Im, K. C. Lee, “An agent-based web service approach for supply chain collaboration”, Scientia Iranica, Vol. 18,No. 6, pp. 1545-1552, 2011 DOI: https://doi.org/10.1016/j.scient.2011.11.009
R. Xu, X. Zhai, “Optimal models for single-period supply chain problems with fuzzy demand”, Information Sciences, Vol. 178, No. 17, pp. 3374-3381, 2008 DOI: https://doi.org/10.1016/j.ins.2008.05.012
M. A. Sodenkamp, M. Tavana, D. Di Caprio, “Modeling synergies in multi-criteria supplier selection and order allocation: An application to commodity trading”, European Journal of Operational Research, Vol. 254, No. 3, pp. 859-874, 2016 DOI: https://doi.org/10.1016/j.ejor.2016.04.015
S. Gavirneni, “Benefits of co-operation in a production distribution environment”, European Journal of Operational Research, Vol. 130, No. 3, pp. 612-622, 2001 DOI: https://doi.org/10.1016/S0377-2217(99)00423-3
A. Villa, D. Bellomo, I. Cassarino, “Uncertain demand and supply networks management: application to a regional health care service”, IFAC Proceedings Volumes, Vol. 38, No. 1, pp. 30-35, 2005 DOI: https://doi.org/10.3182/20050703-6-CZ-1902.01430
B. Marchi, J.M. Ries, S. Zanoni, C. H. Glock, “A joint economic lot size model with financial collaboration and uncertain investment opportunity”, International Journal of Production Economics, Vol. 176, pp. 170-182, 2016 DOI: https://doi.org/10.1016/j.ijpe.2016.02.021
Z. Huang, S. X. Li, “Co-op advertising models in manufacturer–retailer supply chains: A game theory approach”, European Journal of Operational Research, Vol. 135, No. 3, pp. 527-544, 2001 DOI: https://doi.org/10.1016/S0377-2217(00)00327-1
C. Durugbo, X. Wang, “Network-oriented Uncertainty Evaluation of Industrial Product-service Collaborative Readiness”, Procedia CIRP, Vol. 16, pp. 229-234, 2014 DOI: https://doi.org/10.1016/j.procir.2014.01.025
J. -Y. Lee, L. Ren, “Vendor-managed inventory in a global environment with exchange rate uncertainty”, International Journal of Production Economics, Vol. 130, No. 2, pp. 169-174, 2011 DOI: https://doi.org/10.1016/j.ijpe.2010.12.006
T. Hosoda, S. M. Disney, S. Gavirneni, “The impact of information sharing, random yield, correlation, and lead times in closed loop supply chains”, European Journal of Operational Research, Vol. 246, No. 3, pp. 827-836, 2015 DOI: https://doi.org/10.1016/j.ejor.2015.05.036
M. R. Galbreth, M. Kurtuluş, M. Shor, “How collaborative forecasting can reduce forecast accuracy”, Operations Research Letters, Vol. 43, No. 4, pp. 349-353, 2015 DOI: https://doi.org/10.1016/j.orl.2015.04.006
X. Zhu, S. K. Mukhopadhyay, X. Yue, “Role of forecast effort on supply chain profitability under various information sharing scenarios”, International Journal of Production Economics, Vol. 129, No. 2, pp. 284-291, 2011 DOI: https://doi.org/10.1016/j.ijpe.2010.10.021
U. Ramanathan, “Aligning supply chain collaboration using Analytic Hierarchy Process”, Omega, Vol. 41, No. 2, pp. 431-440, 2013 DOI: https://doi.org/10.1016/j.omega.2012.03.001
M. Leng, A. Zhu, “Side-payment contracts in two-person nonzero-sum supply chain games: Review, discussion and applications”, European Journal of Operational Research, Vol. 196, No. 2, pp. 600-618, 2009 DOI: https://doi.org/10.1016/j.ejor.2008.03.029
H. -M. Song, H. Yang, A. Bensoussan, “Optimizing production and inventory decisions in a supply chain with lot size, production rate and lead time interactions”, Applied Mathematics and Computation, Vol. 224, pp. 150-165, 2013 DOI: https://doi.org/10.1016/j.amc.2013.08.054
G. Xu, B. Dan, X. Zhang, C. Liu, “Coordinating a dual-channel supply chain with risk-averse under a two-way revenue sharing contract”, International Journal of Production Economics, Vol. 147, Part A, pp. 171-179, 2014 DOI: https://doi.org/10.1016/j.ijpe.2013.09.012
Z. Lin, C. Cai, B. Xu, “Supply chain coordination with insurance contract”, European Journal of Operational Research, Vol. 205, No. 2, pp. 339-345, 2010 DOI: https://doi.org/10.1016/j.ejor.2010.01.013
Y. Zheng, S. Zhang, X. Chen, F. Liu, “Application of Modified Shapley Value in Gains Allocation of Closed-loop Supply Chain under Third-Party Reclaim”, Energy Procedia, Vol. 5, pp. 980-984, 2011 DOI: https://doi.org/10.1016/j.egypro.2011.03.173
B. Yan, T. Wang, Y. -P. Liu, Y. Liu, “Decision analysis of retailer-dominated dual-channel supply chain considering cost misreporting”, International Journal of Production Economics, Vol. 178, pp. 34-41, 2016 DOI: https://doi.org/10.1016/j.ijpe.2016.04.020
Y. Wei, T. -M. Choi, “Mean–variance analysis of supply chains under wholesale pricing and profit sharing schemes”, European Journal of Operational Research, Vol. 204, No. 2, pp. 255-262, 2010 DOI: https://doi.org/10.1016/j.ejor.2009.10.016
D. W. Cho, Y. H. Lee, “The value of information sharing in a supply chain with a seasonal demand process”, Computers and Industrial Engineering, Vol. 65, No. 1, pp. 97-108, 2013 DOI: https://doi.org/10.1016/j.cie.2011.12.004
S. Kumar, M. Yang, D. M. Strike, “Assessing effect of global inventory planning with enterprise-wide information for a large manufacturer”, Journal of Manufacturing Systems, Vol. 34, pp. 34-42, 2015 DOI: https://doi.org/10.1016/j.jmsy.2014.10.001
F. Costantino, G. Di Gravio, A. Shaban, M. Tronci, “The impact of information sharing on ordering policies to improve supply chain performances”, Computers and Industrial Engineering, Vol. 82, pp. 127-142, 2015 DOI: https://doi.org/10.1016/j.cie.2015.01.024
E. S. Nasr, M. D. Kilgour, H. Noori, “Strategizing niceness in co-opetition: The case of knowledge exchange in supply chain innovation projects”, European Journal of Operational Research, Vol. 244, No. 3, pp. 845-854, 2015 DOI: https://doi.org/10.1016/j.ejor.2015.02.011
J. Zhang, J. Chen, “Coordination of information sharing in a supply chain”, International Journal of Production Economics, Vol. 143, No. 1, pp. 178-187, 2013 DOI: https://doi.org/10.1016/j.ijpe.2013.01.005
J. -C. Wang, H. -S. Lau, A. H. L. Lau, “How a retailer should manipulate a dominant manufacturer's perception of market and cost parameters”, International Journal of Production Economics, Vol. 116, No. 1, pp. 43-60, 2008 DOI: https://doi.org/10.1016/j.ijpe.2008.06.007
T. -M. Choi, J. Li, Y. Wei, “Will a supplier benefit from sharing good information with a retailer?”, Decision Support Systems, Vol. 56, pp. 131-139, 2013 DOI: https://doi.org/10.1016/j.dss.2013.05.011
Y. Zhao, X. Zhao, “On human decision behavior in multi-echelon inventory management”, International Journal of Production Economics, Vol. 161, pp. 116-128, 2015 DOI: https://doi.org/10.1016/j.ijpe.2014.12.005
T. Hosoda, S. M. Disney, “On variance amplification in a three-echelon supply chain with minimum mean square error forecasting”, Omega, Vol. 34, No. 4, pp. 344-358, 2006 DOI: https://doi.org/10.1016/j.omega.2004.11.005
Y. Ouyang, X. Li, “The bullwhip effect in supply chain networks”, European Journal of Operational Research, Vol. 201, No. 3, pp. 799-810, 2010 DOI: https://doi.org/10.1016/j.ejor.2009.03.051
Y. Ouyang, “The effect of information sharing on supply chain stability and the bullwhip effect”, European Journal of Operational Research, Vol. 182, No. 3, pp. 1107-1121, 2007 DOI: https://doi.org/10.1016/j.ejor.2006.09.037
J. G. Kim, D. Chatfield, T. P. Harrison, J. C. Hayya, “Quantifying the bullwhip effect in a supply chain with stochastic lead time”, European Journal of Operational Research, Vol. 173, No. 2, pp. 617-636, 2006 DOI: https://doi.org/10.1016/j.ejor.2005.01.043
J. Dejonckheere, S. M. Disney, M. R Lambrecht, D. R. Towill, “The impact of information enrichment on the Bullwhip effect in supply chains: A control engineering perspective”, European Journal of Operational Research, Vol. 153, No. 3, pp. 727-750, 2004 DOI: https://doi.org/10.1016/S0377-2217(02)00808-1
D. C. Chatfield, A. M. Pritchard, “Returns and the bullwhip effect”, Transportation Research Part E: Logistics and Transportation Review, Vol. 49, No. 1, pp. 159-175, 2013 DOI: https://doi.org/10.1016/j.tre.2012.08.004
M. S. Sodhi, C. S. Tang, “The incremental bullwhip effect of operational deviations in an arborescent supply chain with requirements planning”, European Journal of Operational Research, Vol. 215, No. 2, pp. 374-382, 2011 DOI: https://doi.org/10.1016/j.ejor.2011.06.019
D. Sabitha, C. Rajendran, S. Kalpakam, H. Ziegler, “The value of information sharing in a serial supply chain with AR(1) demand and non-zero replenishment lead times”, European Journal of Operational Research, Vol. 255, No. 3, pp. 758-777, 2016 DOI: https://doi.org/10.1016/j.ejor.2016.05.016
X. Yuan, L. Shen, J. Ashayeri, “Dynamic simulation assessment of collaboration strategies to manage demand gap in high-tech product diffusion”, Robotics and Computer-Integrated Manufacturing, Vol. 26, No. 6, pp. 647-657, 2010 DOI: https://doi.org/10.1016/j.rcim.2010.06.020
S. M. Ross, Simulation, Elsevier Academic Press, 2006
R. A. Howard, A. E. Abbas, Foundations of Decision Analysis, Pearson Education, 2016
Downloads
How to Cite
License
Copyright (c) 2017 M. L. Chew Hernandez, L. Viveros Rosas, R. F. Retes Mantilla, G. J. Espinosa Martínez, V. Velazquez Romero
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain the copyright and grant the journal the right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) after its publication in ETASR with an acknowledgement of its initial publication in this journal.
