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Secure collaborative supply chain planning and inverse optimization - The JELS model

Author

Listed:
  • Pibernik, Richard
  • Zhang, Yingying
  • Kerschbaum, Florian
  • Schröpfer, Axel

Abstract

It is a well-acknowledged fact that collaboration between different members of a supply chain yields a significant potential to increase overall supply chain performance. Sharing private information has been identified as prerequisite for collaboration and, at the same time, as one of its major obstacles. One potential avenue for overcoming this obstacle is Secure Multi-Party Computation (SMC). SMC is a cryptographic technique that enables the computation of any (well-defined) mathematical function by a number of parties without any party having to disclose its input to another party. In this paper, we show how SMC can be successfully employed to enable joint decision-making and benefit sharing in a simple supply chain setting. We develop secure protocols for implementing the well-known "Joint Economic Lot Size (JELS) Model" with benefit sharing in such a way that none of the parties involved has to disclose any private (cost and capacity) data. Thereupon, we show that although computation of the model's outputs can be performed securely, the approach still faces practical limitations. These limitations are caused by the potential of "inverse optimization", i.e., a party can infer another party's private data from the output of a collaborative planning scheme even if the computation is performed in a secure fashion. We provide a detailed analysis of "inverse optimization" potentials and introduce the notion of "stochastic security", a novel approach to assess the additional information a party may learn from joint computation and benefit sharing. Based on our definition of "stochastic security" we propose a stochastic benefit sharing rule, develop a secure protocol for this benefit sharing rule, and assess under which conditions stochastic benefit sharing can guarantee secure collaboration.

Suggested Citation

  • Pibernik, Richard & Zhang, Yingying & Kerschbaum, Florian & Schröpfer, Axel, 2011. "Secure collaborative supply chain planning and inverse optimization - The JELS model," European Journal of Operational Research, Elsevier, vol. 208(1), pages 75-85, January.
  • Handle: RePEc:eee:ejores:v:208:y:2011:i:1:p:75-85
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    References listed on IDEAS

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    1. Yu, Yugang & Huang, George Q., 2010. "Nash game model for optimizing market strategies, configuration of platform products in a Vendor Managed Inventory (VMI) supply chain for a product family," European Journal of Operational Research, Elsevier, vol. 206(2), pages 361-373, October.
    2. Sucky, Eric, 2006. "A bargaining model with asymmetric information for a single supplier-single buyer problem," European Journal of Operational Research, Elsevier, vol. 171(2), pages 516-535, June.
    3. Hau L. Lee & Kut C. So & Christopher S. Tang, 2000. "The Value of Information Sharing in a Two-Level Supply Chain," Management Science, INFORMS, vol. 46(5), pages 626-643, May.
    4. Chris Clifton & Ananth Iyer & Richard Cho & Wei Jiang & Murat Kantarc{i}ou{g}lu & Jaideep Vaidya, 2008. "An Approach to Securely Identifying Beneficial Collaboration in Decentralized Logistics Systems," Manufacturing & Service Operations Management, INFORMS, vol. 10(1), pages 108-125, January.
    5. Yu, Yugang & Chu, Feng & Chen, Haoxun, 2009. "A Stackelberg game and its improvement in a VMI system with a manufacturing vendor," European Journal of Operational Research, Elsevier, vol. 192(3), pages 929-948, February.
    6. 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.
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    Cited by:

    1. Pishchulov, Grigory & Richter, Knut, 2016. "Optimal contract design in the joint economic lot size problem with multi-dimensional asymmetric information," European Journal of Operational Research, Elsevier, vol. 253(3), pages 711-733.
    2. repec:spr:infosf:v:17:y:2015:i:3:d:10.1007_s10796-013-9448-3 is not listed on IDEAS

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