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Cooperation in assembly systems: The role of knowledge sharing networks

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  • Bernstein, Fernando
  • Gürhan Kök, A.
  • Meca, Ana

Abstract

Process improvement plays a significant role in reducing production costs over the life cycle of a product. We consider the role of process improvement in a decentralized assembly system in which a buyer purchases components from several first-tier suppliers. These components are assembled into a finished product, which is sold to the downstream market. The assembler faces a deterministic demand/production rate and the suppliers incur variable inventory costs and fixed setup production costs. In the first stage of the game, which is modeled as a non-cooperative game among suppliers, suppliers make investments in process improvement activities to reduce the fixed production costs. Upon establishing a relationship with the suppliers, the assembler establishes a knowledge sharing network – this network is implemented as a series of meetings among suppliers and also mutual visits to their factories. These meetings facilitate the exchange of best practices among suppliers with the expectation that suppliers will achieve reductions in their production costs from the experiences learned through knowledge sharing. We model this knowledge exchange as a cooperative game among suppliers in which, as a result of cooperation, all suppliers achieve reductions in their fixed costs. In the non-cooperative game, the suppliers anticipate the cost allocation that results from the cooperative game in the second stage by incorporating the effect of knowledge sharing in their cost functions. Based on this model, we investigate the benefits and challenges associated with establishing a knowledge sharing network. We identify and compare various cost allocation mechanisms that are feasible in the cooperative game and show that the system optimal investment levels can be achieved only when the most efficient supplier receives the incremental benefits of the cost reduction achieved by other suppliers due to the knowledge transfer.

Suggested Citation

  • Bernstein, Fernando & Gürhan Kök, A. & Meca, Ana, 2015. "Cooperation in assembly systems: The role of knowledge sharing networks," European Journal of Operational Research, Elsevier, vol. 240(1), pages 160-171.
  • Handle: RePEc:eee:ejores:v:240:y:2015:i:1:p:160-171
    DOI: 10.1016/j.ejor.2014.06.013
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    Cited by:

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    2. García-Martínez, Jose A. & Mayor-Serra, Antonio J. & Meca, Ana, 2020. "Efficient Effort Equilibrium in Cooperation with Pairwise Cost Reduction," MPRA Paper 105604, University Library of Munich, Germany.
    3. Salar Ghamat & Gregory S. Zaric & Hubert Pun, 2021. "Care‐coordination: Gain‐sharing Agreements in Bundled Payment Models," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1457-1474, May.
    4. Amirmohsen Golmohammadi & Alireza Tajbakhsh & Mohamed Dia & Pawoumodom M. Takouda, 2022. "Effect of timing on reliability improvement and ordering decisions in a decentralized assembly system," Annals of Operations Research, Springer, vol. 312(1), pages 159-192, May.
    5. Feng, Hairong & Zeng, Yinlian & Cai, Xiaoqiang & Qian, Qian & Zhou, Yongwu, 2021. "Altruistic profit allocation rules for joint replenishment with carbon cap-and-trade policy," European Journal of Operational Research, Elsevier, vol. 290(3), pages 956-967.
    6. Dawoon Jung & Bosung Kim & Seung Ho Yoo, 2023. "How to facilitate supplier-supplier collaboration: The impact of a manufacturer’s order allocation policy and subsidy offering," Annals of Operations Research, Springer, vol. 323(1), pages 79-107, April.
    7. García-Martínez, Jose A. & Mayor-Serra, Antonio J. & Meca, Ana, 2023. "Efficient effort equilibrium in cooperation with pairwise cost reduction," Omega, Elsevier, vol. 121(C).
    8. Luo, Chunlin & Zhou, Xiaoyang & Lev, Benjamin, 2022. "Core, shapley value, nucleolus and nash bargaining solution: A Survey of recent developments and applications in operations management," Omega, Elsevier, vol. 110(C).
    9. Cerchione, Roberto & Esposito, Emilio, 2016. "A systematic review of supply chain knowledge management research: State of the art and research opportunities," International Journal of Production Economics, Elsevier, vol. 182(C), pages 276-292.
    10. Malacina, Iryna & Teplov, Roman, 2022. "Supply chain innovation research: A bibliometric network analysis and literature review," International Journal of Production Economics, Elsevier, vol. 251(C).
    11. Spanellis, Agnessa & MacBryde, Jillian & Dӧrfler, Viktor, 2021. "A dynamic model of knowledge management in innovative technology companies: A case from the energy sector," European Journal of Operational Research, Elsevier, vol. 292(2), pages 784-797.
    12. Xin Geng & Harish Krishnan & Milind G. Sohoni, 2022. "Operational collaboration between rivals: The impact of cost reduction," Production and Operations Management, Production and Operations Management Society, vol. 31(4), pages 1856-1871, April.

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    Supply chain management; Game theory;

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