A cooperative options-based strategy for coordinating supply chain and resource allocation decisions

The current global economic conditions have resulted in an increased awareness of the need for organisations to cooperate, effectively manage resources, and create sustainable value in the production and delivery of goods and services. This paper considers a multi-agent system exhibiting multiple sources of uncertainty and presents a new model that facilitates the strategic allocation of tasks to resources within supply chains, benefits each agent, and hedges systemic risks through cooperative real options and an allocation incentive (or disincentive) pricing scheme. The results are a conceptual model and decision policies that encourage cooperative actions between buyers and suppliers/sellers/producers to most effectively manage supply chain decisions at both macro (organisations/echelons) and micro (departments) levels. This new model may help supply chain members jointly design flexible contracts that respond dynamically as system information and uncertainties become better known, improve coordination, reduce costs, and minimise the bullwhip effect within large-scale supply chain networks.