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A rewarding-punishing coordination mechanism based on Trust in a divergent supply chain

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  • Pezeshki, Yahya
  • Baboli, Armand
  • Cheikhrouhou, Naoufel
  • Modarres, Mohammad
  • Akbari Jokar, Mohammad R.

Abstract

Coordination of decentralized supply chains using contract design is a problem that has been widely addressed in the literature. We consider a divergent supply chain including a supplier and several retailers producing fashion products with short sale seasons. The retailers cooperate with the supplier as sales agents; i.e., they work in the framework of revenue sharing contracts. Because of their proximity to the market, retailers can provide more accurate demand forecasts to the supplier that is used to decide on issues such as capacity building and market prices with regard to retailers stiff due dates, different lead times and different price-dependent demand functions. To ensure abundant supply and cope with the demand variability, the retailers have an incentive to exaggerate their private forecast information. In this study, we propose a new rewarding-punishing coordination mechanism based on trust between supply chain tiers, considered as a differentiation factor between honest and deceptive partners. An optimization model is developed as a building block of this mechanism. An approximation method is used to simplify and solve the problem. The model is then implemented using Monte-Carlo simulation in four different situations, according to 10 different strategies for forecast information sharing. The findings from the tests show that the mechanism including trust as a decisional factor performs better than ‘No Trust’ mechanism in all situations. These results suggest that taking into account Trust in designing coordination mechanism may have significant influence on the financial performance of the supply chain.

Suggested Citation

  • Pezeshki, Yahya & Baboli, Armand & Cheikhrouhou, Naoufel & Modarres, Mohammad & Akbari Jokar, Mohammad R., 2013. "A rewarding-punishing coordination mechanism based on Trust in a divergent supply chain," European Journal of Operational Research, Elsevier, vol. 230(3), pages 527-538.
    • Handle: RePEc:eee:ejores:v:230:y:2013:i:3:p:527-538
    DOI: 10.1016/j.ejor.2013.04.055
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    References listed on IDEAS

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    Cited by:

    1. Huiqun Yuan & Hongbin Qiu & Ya Bi & Sheng-Hung Chang & Anthony Lam, 2020. "RETRACTED ARTICLE: Analysis of coordination mechanism of supply chain management information system from the perspective of block chain," Information Systems and e-Business Management, Springer, vol. 18(4), pages 681-703, December.
    2. Jinglin Zhao & Hong Zhao, 2020. "RETRACTED ARTICLE: Design of prototype system for multi-agent supply chain information sharing benefit distribution management," Information Systems and e-Business Management, Springer, vol. 18(4), pages 581-602, December.
    3. Gao, Yongling & Driouchi, Tarik, 2018. "Accounting for ambiguity and trust in partial outsourcing: A behavioral real options perspective," Journal of Business Research, Elsevier, vol. 92(C), pages 93-104.
    4. Fu, Xiao & Tan, Hao & Tsenina, Ekaterina & Liu, Shuchun & Han, Guanghua, 2022. "Information sharing based on two-way perceptions of trust and supply chain decisions: A simulation based approach," Chaos, Solitons & Fractals, Elsevier, vol. 157(C).

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