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Buyer-supplier cooperation and negotiation support with random yield consideration

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  • Kelle, Peter
  • Transchel, Sandra
  • Minner, Stefan

Abstract

Random yield is still prevailing in several industries despite quality improvement efforts. In this case, the supply chain partners jointly must find the best way to cope with yield uncertainty. We focus on the inventory-related costs that can be influenced by adjusting the ordering, setup, and delivery policy to the random yield. The yield model of having a random proportion of defective items is assumed with known mean and variance. Two alternative scenarios are examined: when the buyer or when the supplier makes 100% inspection. We provide analytic tools and approximations to optimize the decisions. Our main contribution is to help in the cooperation and negotiation process by showing under which circumstances have the yield characteristics important effects and when are they negligible. We show that not the average yield but the yield uncertainty plays the critical role mainly in providing an appropriate service level but also in finding the optimal shipment and setup policy.

Suggested Citation

  • Kelle, Peter & Transchel, Sandra & Minner, Stefan, 2009. "Buyer-supplier cooperation and negotiation support with random yield consideration," International Journal of Production Economics, Elsevier, vol. 118(1), pages 152-159, March.
    • Handle: RePEc:eee:proeco:v:118:y:2009:i:1:p:152-159
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    References listed on IDEAS

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    Cited by:

    1. Arifoglu, Kenan & Özekici, Süleyman, 2011. "Inventory management with random supply and imperfect information: A hidden Markov model," International Journal of Production Economics, Elsevier, vol. 134(1), pages 123-137, November.
    2. Zare, Marjan & Esmaeili, Maryam & He, Yuanjie, 2019. "Implications of risk-sharing strategies on supply chains with multiple retailers and under random yield," International Journal of Production Economics, Elsevier, vol. 216(C), pages 413-424.
    3. He, Yuanjie, 2013. "Sequential price and quantity decisions under supply and demand risks," International Journal of Production Economics, Elsevier, vol. 141(2), pages 541-551.
    4. Laslo, Zohar & Gurevich, Gregory & Keren, Baruch, 2009. "Economic distribution of budget among producers for fulfilling orders under delivery chance constraints," International Journal of Production Economics, Elsevier, vol. 122(2), pages 656-662, December.
    5. Guo Li & Mengqi Liu & Xu Guan, 2017. "Diversity of payment contracts in a decentralized assembly system," Annals of Operations Research, Springer, vol. 257(1), pages 613-639, October.
    6. Jain, Tarun & Hazra, Jishnu, 2017. "Sourcing strategies under agglomeration economies, capacity risks and retail competition," International Journal of Production Economics, Elsevier, vol. 191(C), pages 311-322.
    7. Glock, Christoph H., 2012. "The joint economic lot size problem: A review," International Journal of Production Economics, Elsevier, vol. 135(2), pages 671-686.
    8. Yu, Jonas C.P., 2013. "A collaborative strategy for deteriorating inventory system with imperfect items and supplier credits," International Journal of Production Economics, Elsevier, vol. 143(2), pages 403-409.

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