Collaborative replenishment in the presence of intermediaries

Abstract

In complex supply chains, individual downstream buyers would often rather replenish from intermediaries than directly from manufacturers. Direct replenishment from manufacturers can be a less costly alternative when carried out by the buyers collaboratively. This paper constructs a general model to study collaborative replenishment in multi-product supply chains in the presence of intermediaries. We introduce a class of associated cooperative games, outline a sufficient condition for their stability, and formulate a lower bound for individual allocations in the core. Drawing upon a class of associated two-stage games, we investigate the choice of allocation rule and its effect on the individuals' strategic decisions about participation in the collaborative organization. We prove that the Shapley value coordinates the supply chain as it makes complete participation the best individual choice for all buyers under complete or incomplete information. We show if the collaborative organization disregards the replenishment options from the intermediaries, so that they would be handled individually, no allocation rule could always coordinate the supply chain.

A Horizontal Collaborative Approach based on Shapley Value in the Supply Chain Distribution

“…According to the studies some authors focused on the profit allocation problem, as [8] [9] [10]. In the field of long distance freight, [11] proposed some formal properties so that coalitions can share gains while avoiding empty kilometers. As far as the methodologies used to support the collaboration are concerned, [12] mentioned that most of the studies use sharing principles based on cooperative game theory.…”

Competition in dual-channel supply chains: The manufacturers' channel selection

“…In another stream without horizontal competitors, competition can also arise due to the conflict between traditional channels and new channel formats based on innovative selling platforms such as ebusiness. Vertical competition can extend to both vertical and horizontal conflicts in this case, in which both double marginalization and channel substitutability play important roles (Hezarkhani et al, 2018). Some studies have considered a multi-channel manufacturer that sells to consumers through both intermediaries and direct stores and discussed whether adding a new channel can benefit the channel members (Cai, 2010;Chen, Liang, Yao, & Sun, 2017;Dumrongsiri, Fan, Jain, & Moinzadeh, 2008;Huang & Swaminathan, 2009;Lu & Liu, 2015;Tsay & Agrawal, 2004;Yan, Zhao, & Liu, 2018).…”

“…Direct channels may lose the benefits of intermediaries' functions such as market coverage and information collection (Tsay & Agrawal, 2004), thus manufacturers and retailers become horizontal competitors, i.e., competitors who are offering substitute products or services at the same level in the supply chain (Choi, 1991). A dual-channel strategy combining retail channels with direct selling also has its downside; it forces manufacturers to become both vertical and horizontal competitors to their retailers, which, in turn, cannibalizes their sales due to the horizontal substitutability (Hezarkhani, Slikker, & Van Woensel, 2018;Matsui, 2020;Shipley, Egan, & Edgett, 1991). Additionally, Choi (2003) finds that a direct channel can raise the entry barrier for latecomers, which is another factor that cuts off the extension of dual-channel manufacturers.…”

The collaborative multi-level lot-sizing problem with cost synergies

“…This is a natural extension, since all kinds of collaborations are motivated by such synergy effects. In the problem at hand, such synergies might occur due to joint setups (Jans and Degraeve 2008), replenishments (Federgruen and Tzur 1994;Hezarkhani, Slikker, and Van Woensel 2018), or transportation (Ke and Bookbinder 2018). Thus, a single item might be too costly for a producer, while it is attractive when offered in a bundle with other items.…”

“…In practical applications, agents will be assigned with more than one item. Production of several products is known to come with mutual cost synergies due to joint setups (Jans and Degraeve 2008), replenishments (Federgruen and Tzur 1994;Hezarkhani, Slikker, and Van Woensel 2018), or transportation (Ke and Bookbinder 2018). While the multi-level lot-sizing problem is known to be NP-hard (Homberger 2010), the extension to rivalling agents clearly increases complexity.…”