Article ID: | iaor200968958 |
Country: | United Kingdom |
Volume: | 6 |
Issue: | 1 |
Start Page Number: | 27 |
End Page Number: | 53 |
Publication Date: | May 2009 |
Journal: | International Journal of Operational Research |
Authors: | Narahari Y, Hemachandra N, Srivastava Nikesh Kumar, Kulkarni Devadatta M, Tew Jeffrey D |
In this paper, we consider a decentralised supply chain formation problem for multi-echelon supply chains when the managers of the individual echelons are rational and intelligent. At each echelon, there is a choice of service providers and the specific problem we solve is that of determining a cost-optimal mix of service providers so as to achieve a desired level of end-to-end delivery performance. In this paper, we develop a mechanism design framework for addressing this problem and propose two incentive compatible mechanisms: Supply Chain Formation – Dominant Strategy Incentive Compatibility (SCF-DSIC) and Supply Chain Formation – Bayesian Incentive Compatibility (SCF-BIC). We illustrate the efficacy of the proposed methodology using the example of a three echelon manufacturing supply chain.