Impact of decision sequence on reliability enhancement with supply disruption risks. (June 2016)

• Record Type: Journal Article
• Authors: Li, Guo; Zhang, Lijun; Guan, Xu; Zheng, Junjun
• Is Part Of: Transportation research. Volume 90(2016)
• Page Start: 25
• Page End: 38
• Publication Date: 2016-06
• Subjects: Decision sequence -- Reliability enhancement -- Supply disruption risks -- Game theory; Logistics -- Periodicals; Transportation -- Periodicals; 388.011
• DOI: 10.1016/j.tre.2015.09.008
• Languages: English
• ISSNs: 1366-5545

Abstract

Highlights: Distinguish two decision sequences in the supply chain. Decision sequence significantly influences the supplier's reliability and the firms' profitabilities. Supply chain reliability achieves a higher level under the supplier–leader game but this does not guarantee a higher supply chain payoff. Each firm prefers to make the decision first but the supply chain can be better off under either of the decision sequences. Abstract: This paper considers a supply chain that consists of a manufacturer and a supplier who faces disruption risks. We investigate the impact of decision sequence on the supplier's endogenous reliability enhancement and the firms' equilibrium pricing strategies. The supply chain reliability achieves a higher level under the supplier–leader game, but this does not always lead to a higher payoff for the supply chain. Each firm prefers to make the decision first, while any decision sequence can become dominant for the supply chain. We also show that the supply chain can achieve coordination via the revenue sharing contract.