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A negotiation-based algorithm to coordinate supplier development in decentralized supply chains

Title data

Proch, Michael ; Schlüchtermann, Jörg ; Wortmann, Karl:
A negotiation-based algorithm to coordinate supplier development in decentralized supply chains.
In: European Journal of Operational Research. Vol. 256 (2017) Issue 2 . - pp. 412-429.
ISSN 0377-2217
DOI: https://doi.org/10.1016/j.ejor.2016.06.029

Abstract in another language

In this paper, we study supplier development in a decentralized supply chain with a single manufacturer and a single supplier. Because supplier development usually requires relationship-specific investments, the allocation of investment costs is a critical issue faced by participating firms. Referencing the relational view, we first investigate the effects of relationship-specific investments on the efficiency and effectiveness of supplier development. Next, we formulate and solve a continuous time optimal control model characterizing the decision to invest in supplier development and show that the supplier’s incentive to participate in supplier development critically depends on the manufacturer’s share of investment costs. The findings of our numerical analysis indicate that although the subsidy can lead to significant improvement in supply chain performance, subsidizing a constant share of investment costs is not always economically reasonable from the manufacturer’s point of view. Thus, we provide a negotiation-based algorithm that assists the manufacturing firm in gradually increasing the share of investment costs to ensure an efficient level of subsidy, resulting in both perfect supply chain coordination and a win–win situation.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Supply chain management; Supply chain coordination; Supplier development; Optimal control; Relational view
Institutions of the University: Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration V
Faculties > Faculty of Law, Business and Economics > Department of Business Administration > Chair Business Administration V > Chair Business Administration V - Univ.-Prof. Dr. Jörg Schlüchtermann
Profile Fields > Emerging Fields > Food and Health Sciences
Profile Fields
Profile Fields > Emerging Fields
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 20 Feb 2017 10:02
Last Modified: 15 May 2017 11:25
URI: https://eref.uni-bayreuth.de/id/eprint/36093