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Trading reliability targets within a supply chain using Shapley's value

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  • Quigley, John
  • Walls, Lesley

Abstract

The development of complex systems involves a multi-tier supply chain, with each organisation allocated a reliability target for their sub-system or component part apportioned from system requirements. Agreements about targets are made early in the system lifecycle when considerable uncertainty exists about the design detail and potential failure modes. Hence resources required to achieve reliability are unpredictable. Some types of contracts provide incentives for organisations to negotiate targets so that system reliability requirements are met, but at minimum cost to the supply chain. This paper proposes a mechanism for deriving a fair price for trading reliability targets between suppliers using information gained about potential failure modes through development and the costs of activities required to generate such information. The approach is based upon Shapley's value and is illustrated through examples for a particular reliability growth model, and associated empirical cost model, developed for problems motivated by the aerospace industry. The paper aims to demonstrate the feasibility of the method and discuss how it could be extended to other reliability allocation models.

Suggested Citation

  • Quigley, John & Walls, Lesley, 2007. "Trading reliability targets within a supply chain using Shapley's value," Reliability Engineering and System Safety, Elsevier, vol. 92(10), pages 1448-1457.
    • Handle: RePEc:eee:reensy:v:92:y:2007:i:10:p:1448-1457
    DOI: 10.1016/j.ress.2006.09.019
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    References listed on IDEAS

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    1. Rahimi-Ghahroodi, S. & Al Hanbali, A. & Zijm, W.H.M. & Timmer, J.B., 2020. "Multi-resource emergency supply contracts with asymmetric information in the after-sales services," International Journal of Production Economics, Elsevier, vol. 229(C).

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