On coordinating an assembly system under random yield and random demand
AbstractWe consider a decentralized assembly system in which the customer demand and the yield of the suppliers are random. We establish the concavity of expected supply chain profit for arbitrary number of suppliers. We propose two contracts and show that they coordinate the chain under forced compliance. The contracts are mixed type of contracts that include payments from different contract schemes. Particularly, a payment or a penalty to the worst performing supplier seems inevitable. Apart from providing a coordinating contract, we also provide qualitative insights based on a numerical illustration of centralized and decentralized solutions.
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Bibliographic InfoArticle provided by Elsevier in its journal European Journal of Operational Research.
Volume (Year): 196 (2009)
Issue (Month): 1 (July)
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Web page: http://www.elsevier.com/locate/eor
Supply chain management Assemble to order Contract design Random yield Principal agent;
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- Gurnani, Haresh & Gerchak, Yigal, 2007. "Coordination in decentralized assembly systems with uncertain component yields," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1559-1576, February.
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- Li, Xiang & Li, Yongjian & Cai, Xiaoqiang, 2013. "Double marginalization and coordination in the supply chain with uncertain supply," European Journal of Operational Research, Elsevier, vol. 226(2), pages 228-236.
- He, Yuanjie, 2013. "Sequential price and quantity decisions under supply and demand risks," International Journal of Production Economics, Elsevier, vol. 141(2), pages 541-551.
- Xu, Minghui & Lu, Ye, 2013. "The effect of supply uncertainty in price-setting newsvendor models," European Journal of Operational Research, Elsevier, vol. 227(3), pages 423-433.
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