Decentralized supply chain coordination through auction markets: Dynamic lot-sizing in distribution networks

Seokcheon Lee, Soundar Kumara

Research output: Contribution to journalArticle

21 Citations (Scopus)

Abstract

As supply chains become bigger and dynamically structured involving multiple organizations with different interests, it is impossible for a single organization to control a whole supply chain. So, decentralization of decision rights is an inevitable facet of managing modern supply chains. However, controlling in a decentralized mode can fail without appropriate coordination mechanisms. When the agents of a supply chain are not willing to cooperate in terms of information sharing, the whole supply chain can exhibit expensive inefficiencies such as the bullwhip effect. In this paper, we design a trustworthy decentralized coordination mechanism for dynamic lot-sizing in distribution networks, as an effort to motivate information sharing. We design multiple auctions and each auction coordinates the plans of a supplier and its customers by trading the right of managing the supplier's inventory plan. The coordination mechanism makes a reasonable profit and the profit is divided in an agreeable way. Also, the profits are actual because of the capability of supporting a truth-telling environment. Therefore, the designed coordination mechanism is trustworthy in that it guarantees the right benefits to all the agents in return for information sharing.

Original languageEnglish (US)
Pages (from-to)4715-4733
Number of pages19
JournalInternational Journal of Production Research
Volume45
Issue number20
DOIs
StatePublished - Oct 1 2007

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Electric power distribution
Supply chains
Profitability
Distribution network
Decentralized supply chain
Dynamic lot-sizing
Market dynamics
Supply chain coordination
Auction market
Supply chain
Coordination mechanism
Profit
Information sharing
Suppliers
Auctions

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

Cite this

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Decentralized supply chain coordination through auction markets : Dynamic lot-sizing in distribution networks. / Lee, Seokcheon; Kumara, Soundar.

In: International Journal of Production Research, Vol. 45, No. 20, 01.10.2007, p. 4715-4733.

Research output: Contribution to journalArticle

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