A new procurement and supply contract for manufacturing technology standards’ diffusion from home to host countries

The rise of industry 4.0 has led to the implementation of new technology-based manufacturing standards (TMSs). This study proposes a new contract to support a manufacturer, Haier, in diffusing its home-country TMSs into host countries with technology gaps. The manufacturer conducts the diffusion by operating two-sided networks (i.e. consumer and supplier networks) and dual sourcing (i.e. placing orders from two suppliers in different countries). A procurement contract is designed to coordinate the two-sided networks; it defines a market-pricing and part-procurement problem to maximise the scale of customers and local suppliers, respectively. These suppliers decide whether to accept the contract after considering their production conditions and technology gaps. A part-supply contract is executed if the procurement contract is accepted. Surplus parts are procured from the manufacturer’s home country if the local supply is insufficient. The coupling of procurement and supply contract (PSC) design is inherent, while a hierarchical collaborative optimisation (HCO) model based on Stackelberg game theory is formulated. The HCO model deploys a multi-objective bi-level programming decision structure to examine the PSC coupling. A nested non-dominated sorting genetic algorithm II is designed to address this HCO model, while a case study of refrigerator TMS diffusion is analysed for verification.