Modularity, Lead time and Return Policy for Supply Chain in Mass Customization System

Abstract

Mass Customization (MC) is a flexible manufacturing system with features of Mass Production (MP) and Customization Production (CP). However, there is few researches about competition & cooperation between the upstream MP firm (module manufacturer) and downstream CP firm (assembler) under MC supply chain scenario. From supply chain perspective, this paper first develops the base models considering the influences of return policy, modularity level, production lead time and pricing factors. Furthermore, according to the different decision-making situations, three kinds of MC supply chain models in competitive or cooperative environment (i.e. simultaneous-move game, sequential-move game and the cooperative game) have been built, then, the optimal solution of each model have been analyzed and compared, and coordination mechanism is design to cooperate in MC supply chain via profit-sharing with Nash bargaining power. Finally, through the numerical analysis, we find the highest profit is from the cooperative setting, then followed by in simultaneous-move and sequential-move one, the reason is that the lowest product price and the largest market demand easily occurs in the cooperative game compared with the others, the upstream module manufacturer takes advantage of MP to increase the modularity level and decrease manufacturing cost for the whole supply chain, the downstream assembler task is to shorten the lead time according to customer's needs, while the wholesale price in cooperative game higher than simultaneous-move game and sequential-move game can ensure each firm's benefits, effectively prevent from the effect of double marginalization and obtain Pareto optimality.