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Multi-period hedging and coordination in a prefabricated construction supply chain

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Listed:
  • Yue Zhai
  • Yelin Fu
  • Gangyan Xu
  • George Huang

Abstract

In this paper, a multi-period buffer space hedging coordination between a building contractor (BC) and a logistics provider (LP) is investigated. In order to facilitate the application of the construction lead-time hedging (CLTH) strategy, adopted by the BC, extra buffer space needs to be reserved at LP’s intermediate warehouse for contingency usage. This strategy is defined as ‘buffer space hedging (BSH)’ and it increases the pressure of LP on involving extra storage and maintenance cost. Two coordination mechanisms are adopted for solving this BSH problem. One scheme is by introducing a cost-sharing term. A Nash game model is studied to find the individual optimal decisions. Another scheme is a cooperative game model with proper side-payments. We show that adjusting the BSH amount for each review period benefits the supply chain. Both coordination mechanisms enable a win–win outcome. Especially, if system resources are sufficient, the cooperative game outperforms the Nash game. Numerical experiments further demonstrate that the benefit of the proposed model is more significant under the case with lower unit enlarging/rearrangement cost, higher tardiness penalty and unpredictable and uncontrollable construction process-determined assembled and installed prefabs.

Suggested Citation

  • Yue Zhai & Yelin Fu & Gangyan Xu & George Huang, 2019. "Multi-period hedging and coordination in a prefabricated construction supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 57(7), pages 1949-1971, April.
    • Handle: RePEc:taf:tprsxx:v:57:y:2019:i:7:p:1949-1971
    DOI: 10.1080/00207543.2018.1512765
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    Cited by:

    1. Wen Jiang & Meng Yuan, 2022. "Coordination of Prefabricated Construction Supply Chain under Cap-and-Trade Policy Considering Consumer Environmental Awareness," Sustainability, MDPI, vol. 14(9), pages 1-22, May.
    2. Pei Dang & Zhanwen Niu & Shang Gao & Lei Hou & Guomin Zhang, 2020. "Critical Factors Influencing the Sustainable Construction Capability in Prefabrication of Chinese Construction Enterprises," Sustainability, MDPI, vol. 12(21), pages 1-21, October.
    3. Zhai, Yue & Choi, Tsan-Ming & Shao, Saijun & Xu, Su Xiu & Huang, George Q., 2020. "Spatial-temporal hedging coordination in prefabricated housing production," International Journal of Production Economics, Elsevier, vol. 229(C).
    4. Wen Jiang & Yichao Hua & Meng Yuan & Igor Martek & Weiling Jiang, 2024. "Pricing Models under Three-Echelon Prefabricated Construction Supply Chains with Consumer Preferences," Sustainability, MDPI, vol. 16(2), pages 1-25, January.
    5. Raunaq Srivastav & Pritee Ray, 2020. "Contracts Choice in Retailer-led Supply Chain," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(1), pages 77-90, June.

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