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Theory and Applications SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. Supply Chain
Theory and Applications Edited by
Vedran Kordic I-TECH Education and Publishing SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. Published by the I-Tech Education and Publishing, Vienna, Austria Abstracting and non-profit use of the material is permitted with credit to the source. Statements and
opinions expressed in the chapters are these of the individual contributors and not necessarily those of
the editors or publisher. No responsibility is accepted for the accuracy of information contained in the
published articles. Publisher assumes no responsibility liability for any damage or injury to persons or
property arising out of the use of any materials, instructions, methods or ideas contained inside. After
this work has been published by the Advanced Robotic Systems International, authors have the right to
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other personal use of the work.
© 2008 I-Tech Education and Publishing
Additional copies can be obtained from:
[email protected]
First published February 2008
Printed in Croatia A catalog record for this book is available from the Austrian Library.
Supply Chains, Theory and Applications, Edited by Vedran Kordic
p. cm.
ISBN 978-3-902613-22-6
1. Supply Chain. 2. Theory. 3. Applications. SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. Preface
Traditionally supply chain management has meant factories, assembly lines, warehouses, transportation vehicles, and time sheets. Modern supply chain management is a highly complex, multidimensional problem set with virtually endless
number of variables for optimization.
An Internet enabled supply chain may have just-in-time delivery, precise inventory visibility, and up-to-the-minute distribution-tracking capabilities. Technology
advances have enabled supply chains to become strategic weapons that can help
avoid disasters, lower costs, and make money.
From internal enterprise processes to external business transactions with suppliers,
transporters, channels and end-users marks the wide range of challenges researchers have to handle.
The aim of this book is at revealing and illustrating this diversity in terms of scientific and theoretical fundamentals, prevailing concepts as well as current practical
applications. SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. Contents
Preface ........................................................................................................................................V
1. Supply Chain Collaboration .............................................................................................001
Ana Meca and Judith Timmer
2. Towards a Quantitative Performance
Measurement Model in a Buyer-Supplier Relationship Context....................................019
Lamia Berrah and Vincent Cliville
3. A Framework for Assessing and Managing Large Purchaser
Minority Supplier Relationships in Supplier Diversity Initiatives ..................................041
Nicholas Theodorakopoulos and Monder Ram
4. An Evaluation Framework for
Supply Chains based on Corporate Culture Compatibility.............................................059
Khalid Al-Mutawah and Vincent Lee
5. How Negotiation Influences the Effective Adoption of the
Revenue Sharing Contract: A Multi-Agent Systems Approach .....................................073
Ilaria Giannoccaro and Pierpaolo Pontrandolfo
6. Mean-Variance Analysis of Supply Chain Contracts ...................................................085
Tsan-Ming Choi
7. Developing Supply Chain Management
System Evaluation Attributes Based on the Supply Chain Strategy ...........................095
Chun-Chin Wie and Liang-Tu Chen
8. Impact of Hybrid Business Models in the Supply Chain Performance.....................113
C. Martinez-Olvera
9. Configuring Multi-Stage Global Supply Chains With Uncertain Demand ................135
Guoqing Zhang and Behnaz Saboonchi SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. VIII 10. Fuzzy Parameters and their
Arithmetic Operations in Supply Chain Systems .............................................................153
Alex Rajan
11. Fuzzy Multiple Agent Decision
Support Systems for Supply Chain Management ............................................................177
Mohammad Hossein Fazel Zarandi and Mohammad Mehdi Fazel Zarandi
12. Align Agile Drivers, Capabilities and
Providers to Achieve Agility: a Fuzzy-Logic QFD Approach..........................................205
Chwei-Shyong Tsai, Chien-Wen Chen and Ching-Torng Lin
13. Optimization Of Multi-Tiered
Supply Chain Networks With Equilibrium Flows ..............................................................231
Suh-Wen Chiou
14. Parameterization of MRP for
Supply Planning Under Lead Time Uncertainties ............................................................247
A. Dolgui , F. Hnaien , A. Louly and H. Marian
15. Design, Management and Control of Logistic Distribution Systems......................263
Riccardo Manzini and Rita Gamberini
16. Concurrent Design of Product
Modules Structure and Global Supply Chain Configuration ..........................................291
H. A. ElMaraghy and N. Mahmoudi
17. Quantitative Models for Centralised Supply Chain Coordination ...........................307
Mohamad Y. Jaber and Saeed Zolfaghari
18. Moving Segmentation Up the Supply-Chain:
Supply Chain Segmentation and Artificial Neural Networks..........................................339
Sunil Erevelles and Nobuyuki Fukawa
19. A Dynamic Resource Allocation on Service Supply Chain ......................................351
Soo Wook Kim and Kanghwa Choi
20. Pricing in Supply Chain under Vendor Managed Inventory .....................................387
Subramanian Nachiappan and Natarajan Jawahar
21. Transshipment Problems in
Supply Chain Systems: Review and Extensions..............................................................427
Chuang-Chun Chiou SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. IX 22. The Feasibility Analysis of
Available-to-Promise in Supply-Chain System under Fuzzy Environment ..................449
Chen-Tung Chen
23. Assessing Improvement Opportunities
and Risks of Supply Chain Transformation Projects.......................................................469
Alessandro Brun and Maria Caridi
24. Modeling of Supply Chain Contextual-Load Model for Instability Analysis ..........489
Nordin Saad, Visakan Kadirkamanathan and Stuart Bennett
25. New Measures for Supply Chain Vulnerability: Characterizing
the Issue of Friction in the Modelling and Practice of Procurement.............................515
N.C. Simpson and P.G. Hancock
26. Competence Based Taxonomy of Supplier Firms in the Automotive Industry..... 537
Krisztina Demeter, Andrea Gelei and Istvan Jenei
27. Design of Multi-behavior Agents for
Supply Chain Planning: An Application to the Lumber Industry...................................551
Pascal Forget, Sophie D’Amours, Jean-Marc Frayret and Jonathan Gaudreault SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. 1
Supply Chain Collaboration
Ana Meca1 and Judith Timmer2
1Operations Research Center (University Miguel Hernandez),
of Applied Mathematics (University of Twente),
1 Spain
2 The Netherlands 2Department 1. Introduction
In the past, research in operations management focused on single-firm analysis. Its goal was
to provide managers in practice with suitable tools to improve the performance of their firm
by calculating optimal inventory quantities, among others. Nowadays, business decisions
are dominated by the globalization of markets and increased competition among firms.
Further, more and more products reach the customer through supply chains that are
composed of independent firms. Following these trends, research in operations
management has shifted its focus from single-firm analysis to multi-firm analysis, in
particular to improving the efficiency and performance of supply chains under
decentralized control. The main characteristics of such chains are that the firms in the chain
are independent actors who try to optimize their individual objectives, and that the
decisions taken by a firm do also affect the performance of the other parties in the supply
chain. These interactions among firms’ decisions ask for alignment and coordination of
actions. Therefore, game theory, the study of situations of cooperation or conflict among
heterogenous actors, is very well suited to deal with these interactions. This has been
recognized by researchers in the field, since there are an ever increasing number of papers
that applies tools, methods and models from game theory to supply chain problems.
The field of game theory may be divided roughly in two parts, namely non-cooperative
game theory and cooperative game theory. Models in non-cooperative game theory assume
that each player in the game (e.g. a firm in a supply chain) optimizes its own objective and
does not care for the effect of its decisions on others. The focus is on finding optimal
strategies for each player. Binding agreements among the players are not allowed. One of
the main concerns when applying non-cooperative game theory to supply chains is whether
some proposed coordination mechanism, or strategy, coordinates the supply chain, that is,
maximizes the total joint profit of the firms in the supply chain. In contrast, cooperative
game theory assumes that players can make binding agreements. Here the focus is on which
coalition of players will form and which allocation of the joint worth will be used. One of the
main questions when applying cooperative game theory to supply chains is whether
cooperation is stable, that is, whether there exists an allocation of the joint profit among all
the parties in the supply chain such that no group of them can do better on its own. Up to
date, many researchers use non-cooperative game theory to analyse supply chain problems. SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. 2 Supply Chain: Theory and Applications This work surveys applications of cooperative game theory to supply chain management.
The supply chains under consideration are so-called divergent distribution networks, which
consist of a single supplier and a finite number of retailers. In particular, we focus on two
important aspects of supply chain collaboration. First, we focus on inventory centralization,
also called inventory pooling.
Retailers may collaborate to benefit from the centralization of their inventories. Such
collaboration may lead to reduced storage costs, larger ordering power, or lower risks, for
example. Models from cooperative game theory may be used to find stable allocations of the
joint costs. Such allocations are important to obtain and maintain the collaboration among
the retailers. There is a steady stream of papers on this subject and these are reviewed here.
Second, we consider retailer-supplier relationships. Besides collaboration among retailers only,
a further gain in efficiency may be obtained by collaboration between the supplier and the
retailers. Also here, the question is how to reduce the joint costs. Cooperative game theory
may be used to find stable allocations of the joint costs. Although a natural field to research,
these problems are hardly studied by means of cooperative game theory. We review the few
papers in the literature and indicate possibilities for future research.
We wish to point out that there are several other areas of cooperative games that lend
themselves nicely to applications in supply chains, but that we do not review. One may
think of bargaining models for negotiations among supply chain partners, network models
to study multi-echelon supply chains, or coalition formation among supply chain partners,
to name some themes. For bargaining models and coalition formation we refer to the review
by Nagarajan & Sošiþ (2006), and for theoretical issues and a framework for more general
supply chain networks we refer to Slikker & Van den Nouweland (2001).
This work is organized as follows. In section 2 we introduce some basic concepts of
cooperative game theory. This helps understand how the collaboration among several
agents is modelled. With this understanding, some well known results from the literature on
cooperative game theory are surveyed. Thereafter we review applications of cooperative
game theory to inventory centralization (section 3). Section 4 reviews and discusses retailersupplier relationships. Finally, section 5 concludes and highlights areas for future research. 2. Cooperative game theory
Game theory provides tools, methods and models to investigate supply chain collaboration,
coordination and competition. The game theory literature can roughly be divided into
cooperative and non-cooperative game theory. There are some differences between analyses
using non-cooperative game theory and those using cooperative game theory. When
applying non-cooperative game theory, it is assumed that each player acts individually
according to its objective, and usually the mechanisms to get it are investigated. One of the
main points of concern is whether the proposed mechanism provides a solution that
maximizes the total supply chain profit under Nash equilibrium.
In contrast, cooperative game theory does not investigate the individual behaviour of the
players explicitly and assume that once the players form a coalition, the coordination
between them is achieved one way or another (i.e., either by making binding agreements
and commitments or by a suitable coordination mechanism). Although cooperative games
abstract from the details of mechanism that lead to cooperation, they are very powerful to
investigate the problem of allocation of worth in detail. Here, the main question is whether
the cooperation is stable, i.e. there are stable allocations of the total worth or cost among the SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. Supply Chain Collaboration 3 players such that no group of them would like to leave the consortium. Cooperative game
theory offers the concept of the core (Gillies, 1953) as a direct answer to that question. Nonemptiness of the core means that there exists at least one stable allocation of the total worth
such that no group of players has an incentive to leave. In this chapter, we concentrate
ourselves mainly on the analysis of coordination induced by cooperation (collaboration). In
this approach cooperative game theory will be instrumental.
Roughly speaking, a transferable utility game (henceforth TU game) is a pair consisting of a
finite set of players and a characteristic function, which measures the worth (benefit or cost)
of every coalition of players, i.e. subset of the finite initial set (grand coalition), through a
real valued mapping. The sub-game related to a particular coalition is the restriction of the
mapping to the sub-coalitions of this coalition. A worth-sharing vector will be a real vector
with as many components as the number of players in the game. The core of the TU game
consists of those efficient worth-sharing vectors which allocate the worth (cost) of the grand
coalition in such a way that every other coalition receives at least (or pays at most) its worth,
given by the characteristic function. In the following, worth-sharing vectors belonging to the
core will be called core-allocations. A TU game has a non-empty core if and only if it is
balanced (see Bondareva 1963 or Shapley 1967). It is a totally balanced game if the core of
every subgame is non-empty. Totally balanced games were introduced by Shapley and
Shubik in the study of market games (see Shapley & Shubik, 1969).
A population monotonic allocation scheme (see Sprumont 1990), or pmas, for a TU game
guarantees that once a coalition has decided upon an allocation of its worth, no player will
ever be tempted to induce the formation of a smaller coalition by using his bargaining skills
or by any others means. It is a collection of worth-sharing vectors for every sub-game
satisfying efficiency property and requiring that the worth to every player increases (or
decreases) as the coalition to which it belongs grows larger. Note that the set of worthsharing vectors that can be reached through a pmas can be seen as a refinement of the core.
Every TU game with pmas is totally balanced.
A game is said to be super-additive (or sub-additive) if it is always beneficial for two disjoint
coalitions to cooperate and form a larger coalition. Balanced TU games might not be superadditive (sub-additive), but they always satisfy super-additive (sub-additive) inequalities
involving the grand coalition. However, totally balanced TU games are super-additive (subadditive). A well-known class of balanced and super-additive (sub-additive) games is the
class of convex (concave) games. A TU game is said to be convex if the incentives for joining
a coalition increase as the coalition grows, so that one might expect a “snowballing” effect
when the game is played cooperatively (Shapley, 1971).
Another class of balanced and super-additive (sub-additive) games is the class of
permutationally convex (concave) games (Granot & Huberman, 1982). A game is
permutationally convex (concave) if and only if there exists an ordering of the players for
the grand coalition such that the game is permutationally convex (concave) with respect to
this ordering. Granot & Huberman (1982) showed that every permutationally concave TU
game is balanced.
A worth allocation rule for TU games, is a map which assigns to every TU game a worthsharing vector. One example of such a worth allocation rule is the proportional rule. This
proportional division mechanism allocates the worth of the grand coalition in a proportional
way according to a fixed proportionality factor (e.g., the individual worth for each player). SOFTbank E-Book Center Tehran, Phone: 66403879,66493070 For Educational Use. 4 Supply Chain: Theory and Applications 3. Inventory centralization
Generally speaking, shops or retailers trade various types of goods, and to keep their service
to their customers at a high level they aim at meeting the demand for all goods on time. To
attain this goal, retailers may keep inventories in a private warehouse. These inventories
bring costs along with them. To keep these costs low, a good management of the inventories
is needed. The management of inventory, or inventory management, started at the
beginning of this century when manufacturing industries and engineering grew rapidly. To
the best of our knowledge, a starting paper on mathematical models of inventory
management was Harris (1913). Since then, many books on this subject have been published.
For example, Hadley & Whitin (1963), Hax & Candea (1984), Tersine (1994), and Zipkin
(2000). Most often, the objective of inventory management is to minimize the average cost
per time unit (in the long run) incurred by the inventory system, while guaranteeing a prespecified minimal level of service.
In this section, we review the literature and study the applications of cooperative game
theory to inventory centralization in supply chains. The supply chains that we focus on
along this work are divergent distribution networks that consist of a supplier and a finite
number of retailers. The main motivation behind using a cooperative game is that it allows
us to establish a framework to examine the effect of coordinated or...
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