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Optimal co-investment in supply chain infrastructure

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  • Kogan, Konstantin
  • Tapiero, Charles S.

Abstract

This paper considers co-investment in a supply chain infrastructure using an inter-temporal model. We assume that firms' capital is essentially the supply chain's infrastructure. As a result, firms' policies consist in selecting an optimal level of employment as well as the level of co-investment in the supply chain infrastructure. Several applications and examples are presented and open-loop, as well as feedback solutions are found for non-cooperating firms, long- and short-run investment cooperation and non-simultaneous moves (Stackelberg) firms. In particular, we show that a solution based on Nash and Stackelberg differential games provides the same level of capital investment. Thus, selecting the leader and the follower in a co-investment program does not matter. We show that in general, co-investments by firms vary both over time and across firms, and thereby render difficult the implementation of co-investment programs for future capital development. To overcome this problem, we derive conditions for firms' investment share to remain unchanged over time and thus be easily planned.

Suggested Citation

  • Kogan, Konstantin & Tapiero, Charles S., 2009. "Optimal co-investment in supply chain infrastructure," European Journal of Operational Research, Elsevier, vol. 192(1), pages 265-276, January.
    • Handle: RePEc:eee:ejores:v:192:y:2009:i:1:p:265-276
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    References listed on IDEAS

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    2. Proch, M. & Worthmann, K. & Schlüchtermann, J., 2017. "A negotiation-based algorithm to coordinate supplier development in decentralized supply chains," European Journal of Operational Research, Elsevier, vol. 256(2), pages 412-429.
    3. Emre Berk & Onurcan Ayas & M. Ali Ülkü, 2023. "Optimizing Process-Improvement Efforts for Supply Chain Operations under Disruptions: New Structural Results," Sustainability, MDPI, vol. 15(17), pages 1-23, August.
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    5. Li, Ying & Gupta, Sudheer, 2011. "Strategic capability investments and competition for supply contracts," European Journal of Operational Research, Elsevier, vol. 214(2), pages 273-283, October.
    6. Kian, Ramez & Gürler, Ülkü & Berk, Emre, 2014. "The dynamic lot-sizing problem with convex economic production costs and setups," International Journal of Production Economics, Elsevier, vol. 155(C), pages 361-379.

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