Mitigating the Cost of Anarchy in Supply Chain Systems
AbstractIn a decentralized two-stage supply chain where a supplier serves a retailer who, in turn, serves end customers, operations decisions based on local incentives often lead to suboptimal system performance. Operating decisions based on local incentives may in such cases lead to a degree of system disorder or anarchy, wherein one party's decisions put the other party and/or the system at a disadvantage. While models and mechanisms for such problem classes have been considered in the literature, little work to date has considered such problems under nonstationary demands and fixed replenishment order costs. This paper models such two-stage problems as a class of Stackelberg games where the supplier announces a set of time-phased ordering costs to the retailer over a discrete time horizon of finite length, and the retailer then creates an order plan, which then serves as the supplier's demand. We provide metrics for characterizing the degree of efficiency (and anarchy) associated with a solution, and provide a set of easily understood and implemented mechanisms that can increase this efficiency and reduce the negative impacts of anarchic decisions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Erasmus University Rotterdam, Econometric Institute in its series Econometric Institute Report with number EI 2012-03.
Date of creation: 01 Mar 2012
Date of revision:
Contact details of provider:
Web page: http://www.few.eur.nl/few
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Z. Kevin Weng, 1995. "Channel Coordination and Quantity Discounts," Management Science, INFORMS, vol. 41(9), pages 1509-1522, September.
- Charles J. Corbett & Xavier de Groote, 2000. "A Supplier's Optimal Quantity Discount Policy Under Asymmetric Information," Management Science, INFORMS, vol. 46(3), pages 444-450, March.
- Harvey M. Wagner & Thomson M. Whitin, 1958. "Dynamic Version of the Economic Lot Size Model," Management Science, INFORMS, vol. 5(1), pages 89-96, October.
- Viswanathan, S. & Piplani, Rajesh, 2001. "Coordinating supply chain inventories through common replenishment epochs," European Journal of Operational Research, Elsevier, vol. 129(2), pages 277-286, March.
- Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
- Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
- Wagelmans, Albert & Hoesel, Stan van & Kolen, Antoon, 1992. "Economic Lot-Sizing: An O(n log n) algorithm that runs in linear time in the Wagner-Whitin case," Open Access publications from Maastricht University urn:nbn:nl:ui:27-3691, Maastricht University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anneke Kop).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.