Allocation of cost savings in a three-level supply chain with demand information sharing : a cooperative game approach
Document Type
Journal article
Source Publication
Operations Research
Publication Date
1-1-2009
Volume
57
Issue
1
First Page
200
Last Page
213
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Keywords
inventory/production, information sharing, games/group decisions, cooperative, supply chain management, cooperative game theory, Nash arbitration scheme, constrained core, Shapley value, constrained nucleolus solution, simulation
Abstract
We analyze the problem of allocating cost savings from sharing demand information in a three-level supply chain with a manufacturer, a distributor, and a retailer. To find a unique allocation scheme, we use concepts from cooperative game theory. First, we analytically compute the expected cost incurred by the manufacturer and then use simulation to obtain expected costs for the distributor and the retailer. We construct a three-person cooperative game in characteristic-function form and derive necessary conditions for the stability of each of five possible coalitions. To divide the cost savings between two members, or among three supply chain members, we use various allocation schemes. We present numerical analyses to investigate the impacts of the demand autocorrelation coefficient, ρ, and the unit holding and shortage costs on the allocation scheme.
DOI
10.1287/opre.1080.0528
Print ISSN
0030364X
E-ISSN
15265463
Publisher Statement
Copyright © 2009, INFORMS
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Leng, M., & Parlar, M. (2009). Allocation of cost savings in a three-level supply chain with demand information sharing: A cooperative game approach. Operations Research, 57(1), 200-213. doi: 10.1287/opre.1080.0528