A decentralized supply chain Is one where each supply chain entity – manufacturer, retailer, intermediary, is free to make it's own operational decisions. However, these decisions need not necessarily all be in the best interest of the entire supply chain, but rather are usually taken keeping in mind the best interests of just the individual entity. a) Recent Literature on supply chain co-ordination with contracts Optimal supply chain performance requires the execution of a precise set of actions that are not always in the interest of the individual supply chain members, who are most often interested in only optimizing their own objectives (Cachon et al. (2003)). Optimal supply chain performance can be achieved if firms coordinate by contracting on a set of transfer payments that are design to align each firm's objective to the supply chain objective. This mechanism is termed decentralized supply chain co-ordination using contracts. In the following, we review some of the important contracts found in recent supply chain literature, the significant assumptions made while deriving the different contract types, the practical use and limitations of each type of contract. Through this section, we aim to develop an essential vocabulary of the state of the art in supply chain contracts and to use this knowledge to develop optimal, coordinating contractual structures for the problems in this dissertation.( Cachon et al. (2003)). Wholesale price contract: With a wholesale price contract, the supplier charges the retailer a fixed price w per-unit of product purchased. Lariviere and Porteus (2001) analyze a wholesale price contract in the context of the news-vendor model. They consider a manufacturer producing a single good at a mar... ... middle of paper ... ...ize the probability of achieving a certain target. They obtain contracts based on the pareto optimality criterion, which is again different from the Nash Equilibrium criterion usually used to derive optimal contract parameters. The authors setup a definition of a pareto contract as : “Within a contractual form, a contract is said to be Pareto if its parameter set is Pareto, that is, there does not exist an alternative parameter set such that no agent is worse off and at least one agent is strictly better off.” They also note that Pareto contracts do not co-ordinate a supply chain, because there is one agent that is always strictly better off than other agents and for a contract to co-ordinate a supply chain, we need that the optimal actions of the agents under the contract lead to pareto optimality for the supply chain, as a whole, and not any individual agent.
The cooperative game theory comes in picture when more than two players in the supply chain come together and form alliances to harness maxim...
A supply chain is a system through which organizations deliver their products and services to their customers. The network begins with the basic ingredients to start the chain of supply, which are the suppliers that supply raw materials, ingredients, and so on. From there, it will transfer the supplies to the manufacturer who builds, assembles, converts, or furnishes a product. The chain now needs to get the product to the consumer by transporting the finished product from the manufacturer through a warehouse or distribution center. An example is that Wal-Mart has a nearby distribution center where products are delivered there and then split up to be delivered to a retail Wal-Mart. “Wal-Mart will take responsibility for breaking down larger loads and delivering the product to other Wal-Mart stores” (Ehring 1).
The rate of growth of the company affected the supply chain management system negatively. Sales and the company grew at a healthy rate annually, but the supply chain management system lagged in performance by comparison, based on a monolithic approach to supply chain sourcing that decentralized orders, inventory management, and the movement of products to retail stores independently by
In a traditional manufacturing company, the supply chain covers the following roles: suppliers, labour, engineering, production, product, quality assurance, inventory, competitors and customers. The last role, that of customers, is different from the rest of the roles within a classic supply chain, meaning that suppliers are oriented upstream, while customers downstream; the labour is situated internally, while customers are external; engineering is done only by qualified engineers; production is protected from customers; products represent the offering that the customers obtain; quality assurance prevents faulty products to get to the customers; inventory can be managed in order to saturate the demand in time; and finally competitors offer customers different choices to satisfy their needs. Taking separately, the customer role in the traditional supply chain often resumes at “selecting, paying for, and using the outputs” and sometimes proving feed-back and promoting a company’s offerings by recommending to others (Sampson and Spring,
“Supply chain. Product life cycle processes comprising physical, information, financial and knowledge flow or movements whose purpose is to satisfy end-user requirements with physical products and intangible services from multiple, linked suppliers.” In other words, supply chains compose a network of different companies that cooperate closely for goods delivery.
‘Supply chain management integrates supply and demand management within and across companies. It encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, thir- party service providers, and customers’. (Web: Council for Supply Chain Management Pr...
Building an effective global supply chain involves integrating and coordinating common materials, processes, designs, technologies and suppliers across worldwide buying, design and operating locations (Trent, 2005). Managing global supply chain poses many challenges which will be examined including cultural differences, language, regional and governmental laws and regulations, and design and integration of global information infrastructure (GII). Additionally, risk assessment of possible disruptions in the supply chain will also be reviewed.
A contract is an exchange of promises or the exchange of a promise for an item or act in return, which is enforceable by law (Kubasek et al, 2014). There are many different types of contracts such as express, implied, void, voidable, and quasi. It is important for contracts to be enforced in order to foster trust in the market place. Although, there is a substantial monetary reason for the Scuppernong grape product manufacturer to end its relationship with Don Willetts, Don’s request for continued relationship due to good faith and fair dealing and an implied contract must be honored.
Supply chain management has been defined as that process that involves the management of information, materials, and all the finances that are handled within and across the entire supply chain process (Christopher, 2016). The management is usually done through out the entire supply chain management from that moment when the suppliers are involved through all the manufacturing activities, different distribution activities, and the way that the products are served to the final product consumer (Turban, et al., 2002). The process also includes all the activities that different organizations offers to their customers as after sale services for purposes perfecting their services and products towards their highly valued customers (Christopher,
“The concept of Supply Chain Management is based on two core ideas. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain. The second idea is that while supply chains have existed for a long time, most organizations have only paid attention to what was happening within their “four walls.” Few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chains.” (Handfield)
Quickly becoming apparent after only a few rounds of play was in the absence of coordinating direction the individual supply chain links immediately focused upon acting in their own best interests much more so than the organization as a whole. Whether the end use customer was satisfied became secondary to avoiding stock outages for the next link in the chain, or their specific “upstream customer”. The real world application of this example is that focus on the end use customer must be consistent and maintained throughout the process up to and including delivery. Undoubtedly internal customers, such as retailers to wholesalers and distributors to production, must be serviced along the way for the transaction to ultimately occur. However, unless an end use customer is involved no profit can be realized by anyone.
A supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system [1]. The basic objective of supply chain is to “optimize performance of the chain to add as much value as possible for the least cost possible.
A supply chain may be very close to a centralized system depending on the performance of the VMI agreement between the supplier and the retailer. The effects of VMI agreements to the coordination of the supply chain is studied in the literature. Cachon (2001) studies VMI in a supply chain with a single supplier-multiple retailers. He analyzes various strategies with the aim of channel coordination. He employs game theory to find the equilibrium for each member of the supply chain. Cachon (2001) remarks that “VMI alone does not guarantee an optimal supply-chain solution; both the vendor and retailers must also agree to make fixed transfer payments to participate in the VMI contract, and then be willing to share the benefits.” Bernstein, Chen and Federgruen (2006) study a partially centralized VMI model. For the supply chain a replenishment strategy is determined. They find that when the demand rate is constant and a single retailer retains the decision rights on pricing, the channel coordination can be achieved. In their supply chain environment, the supplier incurs holding costs of the retailer. Therefore, their system considers consignment inventory with VMI. Dong and Xu (2002) analyze the different impacts of a VMI program on a supply channel in terms of total chain cost and supplier‟s cost. The purchasing price is set by the retailers in the contract; however the selling quantity is determined by the supplier in their model. They find that total chain cost is reduced by VMI, but the profit of the supplier could decrease under some certain conditions. They argue that VMI is an effective strategy that can realize many of the benefits obtainable only in a fully integrated supply channel. Narayanan and Raman (1997) and Fry, Kapuscinski and Olsen (2001) also analyze VMI agreements under stochastic demand and discuss centralization. One aim of our study is to analyze the benefits of the VMI agreement on the
19. Sodhi, Sunil Chopra and ManMohan S. Managing Risk to Avoid Supply Chain Breakdown. MITSloan Management Review. [Online] October 15, 2004. [Cited: February 25, 2010.] http://sloanreview.mit.edu/the-magazine/articles/2004/fall/46109/managing-risk-to-avoid-supplychain-breakdown/.
Decentralization is the process done by not just the government but other organizations, institutions, companies and many more. Decentralization takes place when a central body wants to distribute power to different sectors. These different sectors are expected to shoulder the responsibility that was passed to them. There are different types of decentralization, these are Political Decentralization, Administrative Decentralization, Fiscal Decentralization and Economic or Market Decentralization but in this paper I am going to focus on the Political Decentralization that is taking place in the Federal government of Germany.