Numeric Evaluation of Game-Theoretic Collaboration Modes in Supplier Development

Abstract

To deal with increasingly competitive challenges, today’s companies consider supplier performance as a crucial factor to their competitive advantage. Supplier development is one of the recent approaches to supplier performance enhancement and consistently requires relationship-specific investments. It is important to invest money, experts and/or machines in a supplier to minimize the risk of an inefficient supply chain while maximizing the level of profitability. This paper provides the number of optimization models to confront this issue utilizing Model Predictive Control. We consider a centralized and distributed setting with two manufacturers and one supplier, which enables us to simulate more realistic scenarios. We implement cooperative and non-cooperative scenarios to assess their impact on the manufacturers’ revenue. Results reveal that the cooperative setting between manufacturers pays off better than non-cooperative and collaborative settings in long-term investments. However, for short-term investments, the non-cooperative setting performs better than the others. We can conclude that, in short-term supplier development investments, an added value is generated since both the manufacturers and the supplier gain flexibility, therefore, investing separately can end up with higher profit for both manufacturers.

Evaluation of Loading Bay Restrictions for the Installation of Offshore Wind Farms Using a Combination of Mixed-Integer Linear Programming and Model Predictive Control

“…Generally, MPC is used for the short-term control of continuous systems to cope with unanticipated or indescribable dynamics. Examples of such applications are robot motion control and collision avoidance [36], production control [34,37], supplier management [38], or energy and building management [39]. Further information on examples, implementations, and MPC, in general, can be found, e.g., in [40].…”

Optimization of Supplier Development under Market Dynamics

“…Apart from these basic concepts of supplier development, several studies focused on the investigation of practical applications in various industries, e.g., [8,13,16,34,35]. According to these studies, Toyota started preparing on-site support to engage suppliers in the Toyota Production System [34].…”

“…Dastyar and Pannek provided a set of optimization models to address the risk of supplier development [13].…”

“…However, for shorter investment horizons, the noncooperative setting performs better than the rest. Due to shorter periods of supplier investment, the manufacturers and the suppliers gain flexibility, and this flexibility is advantageous for the manufacturer and the supplier [13].…”

“…is involvement allows suppliers to participate in several supplier development programs, which might influence each other and, thus, introduce hardly predictable dynamics to the effectiveness of each supplier development program. Consequently, Dastyar and Pannek extended the approach of this study to a multimanufacturer scenario, utilizing different game-theoretic collaboration schemes [13]. Nevertheless, while this allows handling the dynamics introduced to the supplier development program by competitors, it does not allow planning under market dynamics.…”