IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v196y2009i1p342-350.html
   My bibliography  Save this article

On coordinating an assembly system under random yield and random demand

Author

Listed:
  • Güler, M. Güray
  • Bilgiç, Taner

Abstract

We 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.

Suggested Citation

  • Güler, M. Güray & Bilgiç, Taner, 2009. "On coordinating an assembly system under random yield and random demand," European Journal of Operational Research, Elsevier, vol. 196(1), pages 342-350, July.
    • Handle: RePEc:eee:ejores:v:196:y:2009:i:1:p:342-350
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377-2217(08)00243-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Khouja, Moutaz, 1999. "The single-period (news-vendor) problem: literature review and suggestions for future research," Omega, Elsevier, vol. 27(5), pages 537-553, October.
    2. 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.
    3. 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.
    4. Candace Arai Yano & Hau L. Lee, 1995. "Lot Sizing with Random Yields: A Review," Operations Research, INFORMS, vol. 43(2), pages 311-334, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tinglong Dai & Soo-Haeng Cho & Fuqiang Zhang, 2016. "Contracting for On-Time Delivery in the U.S. Influenza Vaccine Supply Chain," Manufacturing & Service Operations Management, INFORMS, vol. 18(3), pages 332-346, July.
    2. Hsieh, Chung-Chi & Lai, Hsing-Hua, 2017. "Capacity allocation with differentiated product demands under dual sourcing," International Journal of Production Economics, Elsevier, vol. 193(C), pages 757-769.
    3. Li, Xiang & Li, Yongjian & Cai, Xiaoqiang, 2012. "A note on the random yield from the perspective of the supply chain," Omega, Elsevier, vol. 40(5), pages 601-610.
    4. 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.
    5. Hong Fu & Yongkai Ma & Debing Ni & Xiaoqiang Cai, 2017. "Coordinating a decentralized hybrid push–pull assembly system with unreliable supply and uncertain demand," Annals of Operations Research, Springer, vol. 257(1), pages 537-557, October.
    6. Hu, Fei & Lim, Cheng-Chew & Lu, Zudi, 2013. "Coordination of supply chains with a flexible ordering policy under yield and demand uncertainty," International Journal of Production Economics, Elsevier, vol. 146(2), pages 686-693.
    7. Kimitoshi Sato & Kyoko Yagi & Masahito Shimazaki, 2018. "A Stochastic Inventory Model for a Random Yield Supply Chain with Wholesale-Price and Shortage Penalty Contracts," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(06), pages 1-30, December.
    8. 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.
    9. Tsan-Ming Choi & Kannan Govindan & Xiang Li & Yongjian Li, 2017. "Innovative supply chain optimization models with multiple uncertainty factors," Annals of Operations Research, Springer, vol. 257(1), pages 1-14, October.
    10. Xiao, Tiaojun & (Junmin) Shi, Jim, 2016. "Pricing and supply priority in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 254(3), pages 813-823.
    11. Karl Inderfurth, 2015. "Safety Stocks in Centralized and Decentralized Supply Chains under Different Types of Random Yields," FEMM Working Papers 150007, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    12. B. C. Giri & J. K. Majhi & S. Bardhan & K. S. Chaudhuri, 2021. "Coordinating a three-level supply chain with effort and price dependent stochastic demand under random yield," Annals of Operations Research, Springer, vol. 307(1), pages 175-206, December.
    13. Guo Li & Mengqi Liu & Xu Guan, 2017. "Diversity of payment contracts in a decentralized assembly system," Annals of Operations Research, Springer, vol. 257(1), pages 613-639, October.
    14. 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.
    15. Pan, Wenting & So, Kut C. & Xiao, Guang, 2022. "Benefits of backup sourcing for components in assembly systems under supply uncertainty," European Journal of Operational Research, Elsevier, vol. 302(1), pages 158-171.
    16. Xu Guan & Guo Li & Zhe Yin, 2016. "The implication of time-based payment contract in the decentralized assembly system," Annals of Operations Research, Springer, vol. 240(2), pages 641-659, May.
    17. Fei Ye & Qiang Lin & Yina Li, 2020. "Coordination for contract farming supply chain with stochastic yield and demand under CVaR criterion," Operational Research, Springer, vol. 20(1), pages 369-397, March.
    18. Hu, Fei & Lim, Cheng-Chew & Lu, Zudi, 2014. "Optimal production and procurement decisions in a supply chain with an option contract and partial backordering under uncertainties," Applied Mathematics and Computation, Elsevier, vol. 232(C), pages 1225-1234.
    19. Shaofu Du & Yujiao Zhu & Tengfei Nie & Haisuo Yu, 2018. "Loss-averse preferences in a two-echelon supply chain with yield risk and demand uncertainty," Operational Research, Springer, vol. 18(2), pages 361-388, July.
    20. Ruina Yang & Lijun Ma, 2017. "Two-part tariff contracting with competing unreliable suppliers in a supply chain under asymmetric information," Annals of Operations Research, Springer, vol. 257(1), pages 559-585, October.
    21. He, Yuanjie & Zhang, Jiang, 2010. "Random yield supply chain with a yield dependent secondary market," European Journal of Operational Research, Elsevier, vol. 206(1), pages 221-230, October.
    22. Yuqiang Wu & Weiwei Guo & Zigong Cai & Yang Tong & Jingpeng Chen, 2023. "Research on Contract Coordination Mechanism of Contract Farming Considering the Green Innovation Level," Sustainability, MDPI, vol. 15(4), pages 1-14, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shaofu Du & Yujiao Zhu & Tengfei Nie & Haisuo Yu, 2018. "Loss-averse preferences in a two-echelon supply chain with yield risk and demand uncertainty," Operational Research, Springer, vol. 18(2), pages 361-388, July.
    2. Karl Inderfurth, 2015. "Safety Stocks in Centralized and Decentralized Supply Chains under Different Types of Random Yields," FEMM Working Papers 150007, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    3. Yong He & Xuan Zhao, 2016. "Contracts and coordination: Supply chains with uncertain demand and supply," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(4), pages 305-319, June.
    4. Bo He & Guo Li & Mengqi Liu, 2018. "Impacts of decision sequences on a random yield supply chain with a service level requirement," Annals of Operations Research, Springer, vol. 268(1), pages 469-495, September.
    5. Keren, Baruch, 2009. "The single-period inventory problem: Extension to random yield from the perspective of the supply chain," Omega, Elsevier, vol. 37(4), pages 801-810, August.
    6. Pan, Wenting & So, Kut C. & Xiao, Guang, 2022. "Benefits of backup sourcing for components in assembly systems under supply uncertainty," European Journal of Operational Research, Elsevier, vol. 302(1), pages 158-171.
    7. Choi, Sungyong & Jeon, Sumin & Kim, Jinmin & Park, Kwangtae, 2019. "A newsvendor analysis of a binomial yield production process," European Journal of Operational Research, Elsevier, vol. 273(3), pages 983-991.
    8. He, Yuanjie & Zhang, Jiang, 2008. "Random yield risk sharing in a two-level supply chain," International Journal of Production Economics, Elsevier, vol. 112(2), pages 769-781, April.
    9. Jan A. Van Mieghem & Nils Rudi, 2002. "Newsvendor Networks: Inventory Management and Capacity Investment with Discretionary Activities," Manufacturing & Service Operations Management, INFORMS, vol. 4(4), pages 313-335, August.
    10. Hsieh, Chung-Chi & Lai, Hsing-Hua, 2017. "Capacity allocation with differentiated product demands under dual sourcing," International Journal of Production Economics, Elsevier, vol. 193(C), pages 757-769.
    11. Xiang Li & Yongjian Li, 2016. "On lot-sizing problem in a random yield production system under loss aversion," Annals of Operations Research, Springer, vol. 240(2), pages 415-434, May.
    12. Cai, Jianhu & Hu, Xiaoqing & Jiang, Feiying & Zhou, Qing & Zhang, Xiaoyang & Xuan, Liyuan, 2019. "Optimal input quantity decisions considering commitment order contracts under yield uncertainty," International Journal of Production Economics, Elsevier, vol. 216(C), pages 398-412.
    13. Hua, Zhongsheng & Li, Sijie, 2008. "Impacts of demand uncertainty on retailer's dominance and manufacturer-retailer supply chain cooperation," Omega, Elsevier, vol. 36(5), pages 697-714, October.
    14. Mohammad A.M. Abdel-Aal & Mujahid N. Syed & Shokri Z. Selim, 2017. "Multi-product selective newsvendor problem with service level constraints and market selection flexibility," International Journal of Production Research, Taylor & Francis Journals, vol. 55(1), pages 96-117, January.
    15. Guo Li & Mengqi Liu & Xu Guan, 2017. "Diversity of payment contracts in a decentralized assembly system," Annals of Operations Research, Springer, vol. 257(1), pages 613-639, October.
    16. Weiwei Zhang & Zhongfei Li & Ke Fu & Fan Wang, 2017. "Effect of the Return Policy in a Continuous-Time Newsvendor Problem," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(06), pages 1-28, December.
    17. Bo He & Yange Yang, 2018. "Mitigating supply risk: an approach with quantity flexibility procurement," Annals of Operations Research, Springer, vol. 271(2), pages 599-617, December.
    18. Watt, Richard & Vázquez, Francisco J., 2017. "An analysis of insurance demand in the newsboy problem," European Journal of Operational Research, Elsevier, vol. 259(3), pages 1064-1072.
    19. Kartikeya Puranam & David C. Novak & Marilyn Lucas, 2022. "Extending the newsvendor model to account for uncontrolled inventory transfers," Annals of Operations Research, Springer, vol. 317(1), pages 213-226, October.
    20. Jörnsten, Kurt & Lise Nonås, Sigrid & Sandal, Leif & Ubøe, Jan, 2012. "Transfer of risk in the newsvendor model with discrete demand," Omega, Elsevier, vol. 40(3), pages 404-414.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:196:y:2009:i:1:p:342-350. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.