Poceeding of the Intenational MultiConfeence of Enginee and Compute Scientit 20 Vol II,, Mach -, 20, Hong Kong Optimizing Supply Chain Collaboation Baed on Negotiation and Bagain Powe fo Single Retaile And Single Supplie Ping-Yu Chang Abtact-In ecent yea, indutie inceae thei flexibility, faten thei epone, and enhance concuent engineeing deign to eact to hote poduct life cycle and highly cutomization. To achieve thee popect, upply chain collaboation become a petinent tategy fo indutie to tengthen thei competitivene. A well contucted collaboation between upply chain oganization will enhance tut between upply chain patne and educe poce time in complicated pocedue. Moeove, a valid collaboation will conolidate the haing of infomation, cot, pofit, and ik within patne o that educing inventoy level and inceaing on-time delivey can be achieved. Howeve, ome uncetaintie within collaboative patne uch a cot allocation, cot infomation, and methodology of deciion making ae difficult to be compomied and will affect the elationhip between patne. Theefoe, equally negotiation between collaboative patne in thee uncetaintie will eolve thee uncetaintie and have ignificant effect on upply chain collaboation. Hence, thi eeach analyze the effect of negotiation between echelon on upply chain collaboation. Mathematical model ae developed to ealize the ignificance of effect in uing negotiation within collaboation. Ou eult how that total cot can be educed and cutome atifaction will be inceaed with the appopiate negotiation with in upply chain collaboative patne. Keywod: Supply chain management, Collaboation, Negotiation, Bagain Powe 1. Intoduction In ecent yea, the iing competitive envionment with hote poduct life cycle and highly cutomization foce indutie to inceae thei flexibility, faten thei epone, and enhance concuent engineeing deign. To integate thee popect, upply chain collaboation become a petinent tategy fo indutie to tengthen thei competitivene. A well contucted collaboation between upply chain oganization will enhance tut between upply chain patne and educe poce time in complicated pocedue between them. Moeove, a valid collaboation will conolidate the haing of infomation, cot, pofit, and ik within patne o that educing inventoy level, and inceaing on-time delivey and cutome atifaction can be achieved. To integate upply chain, objective uch a minimum cot and maximum cutome atifaction ae alway pojected. Howeve, thee objective ae uually affected P. Y. C. i with the Ming Chi Univeity of Technology, New Taipei City, 243 Taiwan (coeponding autho to povide phone: 6-2-290999 ext 31; fax: 6-290-900; e-mail: pchang@mail.mcut.edu.tw) ISSN: 207-09 (Pint); ISSN: 207-0966 (Online) becaue of micommunication between buye and upplie. Micommunication between upply chain echelon might inceae inventoy level of each echelon and caue the incement of cot. To educe micommunication, tategic alliance and infomation haing ae uually adapted fo integating upply chain. Howeve, ome infomation uch a capacity planning, poduct deign, and foecating ae claified fo each company and will not be haed fo upply chain patne. Hence, negotiation between upply chain alliance might bing vantage to collaboate infomation haing o that the total pofit of upply chain alliance can be achieved. Futhemoe, thee ae two type of upply chain patne in negotiation, coopeative and competitive. Diffeent type of upply chain patne will have diffeent tategie in eolving poblem within upply chain. Although diffeent tategie ae adopted in negotiation, ame objective of ditibuting benefit and cot aound upply chain ae obtained. Moeove, negotiation though upply chain patne will aue the deciion of maximizing the total pofit of the upply chain but not the maximization of the total pofit fo each company. Theefoe, thi eeach develop a mathematical model to optimize upply chain pofit with conideation of uncetaintie in upply chain negotiation. Futhemoe, capacity planning, demand of buye and upplie, poduction planning, ditibution planning and puchaing ae dicued within thi popoed model. Thi eeach i oganized a followed. Section 1 i the intoduction of thi eeach while Section 2 dicue the liteatue eview. Section 3 demontate the developed model of thi eeach and Section 4 how the concluion. 2. Liteatue Review In ecent yea, the development of upply chain ha focued on linking, integation, and collaboation that extend the ange of efficiency fom the intenal company to upplie and cutome. Olhage [12] addee the total poduct tuctue with the initial aw mateial to the ultimate final poduct and the upply chain lead-time efficiency. A JIT pepective i examined to focu on linking mechanim between ucceive companie and the collective efficiency of the upply chain. waday, the competition i moe between upply chain than between companie. In thi epect it i impotant fo any manufactuing fim to make ue that thei patne companie ae with the good pefomance and the oganization have the ame view to meaue value and competitivene of the final poduct on the maket. In thi envionment, electing a et of potential patne ha
Poceeding of the Intenational MultiConfeence of Enginee and Compute Scientit 20 Vol II,, Mach -, 20, Hong Kong become a challenging eeach topic. Simatupang and Sidhaan [14] thought that the exchange of infomation and the ue of collaboative method do not guaantee an immediate ucce. The moe patne need to wok togethe, the moe time and money will have to be pent to enue a viable collaboation. Moeove, the patnehip will not continue if one of the membe doe not obtain enough gain o if a paticipant attempt to divet the collaboation in hi favo. To avoid thi kind of ituation, Simatupang and Sidhaan [14] ealized that it i often neceay to ue incentive uch a picing ageement o quantity dicount to influence acto deciion and tend towad an optimization of the global netwok. Embeon, et al. [4] peent a citique of the nomative, buye upplie liteatue and in addition ugget that the moe empiically baed liteatue need to expand it cope of attention beyond it taditional confine. Fou main deficiencie ae identified within much of the exiting buye upplie liteatue. Lambet et al. [] peented upply chain patnehip in an attempt to educe cot, impove evice and gain competitive advantage. Lambet et al. [] povide a model which can be ued to detemine whethe a patnehip i waanted and how cloe of a patnehip i waanted. Andeon and Nau [1] pointed out that a ucceful wok patne' elation contain ix key and coopeate a patne of the elation depend on tut, communication and coopeation, and olving conflict. Hagedoon [6] pointed out that the patnehip can be divided into tategic and non-tategic patnehip. The diffeence i the goal and motive. If the coopeation i baed on a tategic bai, the elative upply chain patnehip i alo dependent on elative. If he chooe to keep thi infomation fo himelf, the poduce will have to plan the poduction baed on mechant ode and not on the eal demand of pinte. Thi lack of infomation can lead to inefficient utilization of capacity, tock in exce o hotage, poo quality of evice, etc., thoughout the netwok [9]. Theefoe, in an ideal wold, upply chain patne hould hae thei knowledge o a to deceae negative effect of decentalized planning. Tallui and Bake [17] popoe a multi-phae mathematical pogamming appoach fo effective upply chain deign. It conide potential upplie, manufactue, and ditibuto, and evaluate thei efficiencie baed on multiple facto in phae 1 and deign the upply chain netwok at an aggegate level by matching upply and demand of all potential node in phae 2. Phae 3 involve the initial deployment plan, which identifie the optimal outing of mateial fom elected upplie to manufactue to waehoue by minimizing the total cot. Accoding to the eult, they obtain eveal patne with good pefomance. Gaining a competitive advantage in intenational upply chain equie matching the value-adding activitie of a chain with the unique compaative advantage. A upply chain manage mut identify and contol the facto that affect the pefomance of the chain in each of the thee aea, that i, pocuement, poceing and ditibution. Paad and Soundepandian [] povide a checklit of facto and offe uggetion fo intenational upply chain ISSN: 207-09 (Pint); ISSN: 207-0966 (Online) manage to gain competitive advantage. Feng and Yamahio [] peented an appoach conited of thee tage, qualitative pe-qualification, quantitative evaluation, and compehenive examination. They addeed the poblem of manufactuing a a poduct in a vitual entepie envionment and decided the optimal poce-plant combination. Simchi-Levi et al. [] decibed buine activitie within upply chain into thee level, that i, tategic, tactical, and opeating. Supply chain management have been invetigated in vaiou aea and ome eeach have tudied the negotiation poce between two o moe patne in ode to develop a planning model with minimum infomation exchange ([3] [7], [19]). Zatman [20] thought that negotiation i a deciion-making poce and paticipant mut be fom a numbe of poible option. Howeve, the final deciion i not depended on a negotiato. All negotiato have mutually influence to the deciion-making within the upply chain. Simon [16] defined a complete and ational deciion-making poce with fou main tage, defining the taget poblem, to develop a vaiety of poible option, poible fom a vaiety of poible option to chooe the bet pogam, and implementation. Lai [10] demontated the activity in the negotiation with eveal chaacteitic. Fit of all, it involve two o moe membe and negotiation poce will be moe complicated if moe membe ae included. Second, thee i an obviou o potential inteet among membe. Thid, the dependence of negotiation among the membe will have impact on the negotiation poce and final deciion. Fouth, if the negotiation did not eolve the quetion among membe, a final deciion will not be dawn. Tallui et al. [] contucted a two-phae quantitative famewok to aid the deciion-making poce in effectively electing an efficient and compatible et of patne. Cakavatia et al. [2] contucted a two-tage model fo the deign of upply chain netwok. In thi model, the pefomance of the upply chain i analyzed at two level of deciion-making, chain and opeational level. At the chain level, objective aociated with each citeion ae et fo each tage of the upply chain meet the cutome taget. At the opeational level, the manufactuing and logitical activitie of each potential upplie ae optimized in a way that matche the cutome taget. Thei model obtain eveal upplie with good pefomance fo each of upteam laye. 3. Methodology Thi eeach will analyze the effect of negotiation between echelon on upply chain collaboation. Mathematical model ae developed to ealize the ignificance of effect in uing negotiation within collaboation and demontate the deciion making of patne in achieving minimum cot of upply chain. Futhemoe, mathematical model ae developed baed on Dudek and Stadtle [3] and Lehoux et al. [11]. In Dudek and Stadtle [3], planning deciion uch a puchaing, poduction, tanpotation, and inventoy holding ae concened in the mathematical model. Thei objective function i to minimize the total cot of fulfilling cutome
Poceeding of the Intenational MultiConfeence of Enginee and Compute Scientit 20 Vol II,, Mach -, 20, Hong Kong demand unde the limitation of capacity and opeational containt. Lehoux et al. [11] invetigated the collaboation in pulp and pape induty. A deciion model i developed baed on Collaboative Planning, Foecating and Replenihment (CPFR) method to minimize total cot while capacity containt ae atified. Howeve, thei eeach aume a eal collaboation between patne and the exchange of all the infomation. Real collaboation might not be pactical in the upply chain and bagain powe hould be implemented to detemine the level of a paticula company within negotiation poce. Bagain powe can be detemined baed on the ize, capital flow, and expeience of a company. Theefoe, thi eeach inet bagain powe a a facto into negotiation model o that the effect of diffeent level of companie within negotiation can be ealized. Two mathematical model, buye model and upplie model, ae povided. Moeove, the buye will initiate poduction plan fo both buye and upplie afte eceiving ode fom cutome. The buye will pa the poduction plan to the upplie and upplie will evaluate the poduction plan baed on it capacity, inventoy, and poduction ituation. The upplie might pa the adjuted poduction plan back to the buye and the buye hould detemine if thi popoal i acceptable. The ageement will be dawn until the poduction plan i optimized fom both the buye and the upplie. The idea of mathematical model ae demontated a follow. Paamete: H : inventoy cot of etaile I o : initial inventoy of etaile L : lowe bound of ode quantity of etaile D : demand of etaile U : uppe bound of ode quantity of etaile P o : pice lowe bound of etaile Q o : ode quantity of etaile with pice of P o α: bagain powe of upplie H : inventoy cot of upplie I o : initial inventoy of upplie U : uppe bound of ode quantity of etaile P o : pice lowe bound of etaile Q o : manufactuing quantity of upplie with pice of P o Deciion vaiable P : puchaing pice of etaile Q : ode quantity of etaile I : inventoy of etaile P : elling pice of upplie Q : manufactuing quantity of upplie I : inventoy of upplie Retaile model: in Z P Q I H (1).t I I o Q - D (2) L Q U (3) D (4) L Po P () P -1 Q a o P Q (6) o Containt (1) minimize the total cot while containt (2), (3), (4), (), and (6) geneate the puchaing quantitie, pice, and inventoy unde the limitation of capacity. Thi model will pa the expected pice and quantitie to upplie o that upplie can decide whethe to accept the popoal o tat negotiation. The upplie model i demontated a follow. Supplie model: MaxZ P Q - I H (7).t. I I o Q - D () Q Q U (9) P (10) P 1 - Q a o P Q (11) o P The upplie will evaluate the popoal peented fom buye and geneate it own poduction plan. Containt (7) maximize the total pofit of the upplie while containt (), (9), (10), and (11) geneate the poducing quantitie, elling pice, and inventoy unde the capacity limitation. If the poduction plan i imila to buye popoal, then the upplie will accept the popoal. If the poduction plan i diffeent than the buye popoal, then the upplie will pa the new poduction plan to the buye and tat the negotiation. The ageement will be dawn until the poduction fo the upplie o fo the buye i acceptable. Howeve, thee i no guaantee of achieving the ageement with thi negotiation. The bagain powe will be a facto aociated with the poduction plan and pice that i demontated in containt (11). It epeent the will to adjut it own poduction plan and numbe of holding inventoy. Figue 1 demontate the flow of the negotiation. Once the ode aive, the etaile will optimize it own pice and puchaing quantitie and pa thee infomation to the upplie. The upplie will optimize it own pice and poducing quantitie baed on the etaile popoal. If the upplie cannot achieve optimum olution, it will decide whethe to adjut it pice and poduction plan o eject the etaile popoal. If the upplie adjut it pice and poduction plan and accept the etaile popoal, the negotiation i finalized. If the upplie decide to eject the etaile popoal and popoe it own plan to the etaile, the ucceful of thi negotiation will be baed on the etaile deciion. The negotiation will continue until the popoal i accepted by the etaile and the upplie o i ejected by the etaile o the upplie. ISSN: 207-09 (Pint); ISSN: 207-0966 (Online)
Poceeding of the Intenational MultiConfeence of Enginee and Compute Scientit 20 Vol II,, Mach -, 20, Hong Kong Adjut popoal Stop negotiation Supplie popoe it optimum pice and quantitie acceptance Ye Supplie evaluate etaile popoal Ye Ode aive Retaile popoe it optimum pice and quantitie Supplie evaluate etaile popoal acceptance Figue 1: Negotiation flow Ye Achieve negotiation Table 2 how the quantitie of DRAM afte negotiation. In table 2, the upplie and the etaile achieve ageement in quantitie poduced and puchaed. Table 1 and 2 indicate that ageement will be achieved if both ide can elax thei pice containt. Table 2: DRAM quantitie (in thouand) afte negotiation baed on diffeent bagain powe Supplie\ 2. 3. 4.. 6. 7. etaile 1..00 1/. 3/. 0 9/. 019 2. / /.00 1/. 3/. 0.00 4/. 2/. 012.00 7/. 6/. 016 14.92 3/14. 9 004 007 3. / / / / /.00 1/. 4. / / / / / /. / / / / / / 4. Cae tudy and Concluion To tet the uefulne of the popoed model, eal data of DRAM and tebook ae adapted in the optimization. Seven type of bagain powe ae applied to ealize the effect of the bagain powe on the eult of negotiation fo the etaile and the upplie. Section 4.1 and 4.2 decibe the eult and inight of thee two cae. 4.1 DRAM Table 1 demontate the pice of DRAM afte negotiation. In table 1, no pice i equivalent in diffeent combination of bagain powe fo the upplie and the etaile. If both upplie and the etaile ae not willing to adjut thei pice, the negotiation will be teminated without any ageement. If the upplie o the etaile can elax thei pice fo about 1%, then the etaile and the upplie might each ageement with bagain powe of 4. to 7. and 1. to 7., epectively. Table 1: DRAM pice afte negotiation baed on diffeent bagain powe Supplie\ etaile 2. 3. 4.. 6. 7. 1. 140\1 12\1 122\1 12\1 129\1 12\1 2. 140\1 12\1 122\1 119\1 116\1 119\1 3. 140\1 12\1 122\1 119\1 116\1 1\1 4. 140\1 12\1 122\1 119\1 116\1 114\1. 140\1 12\1 122\1 119\1 116\1 114\1 6. 140\1 12\1 122\1 119\1 116\1 114\1 7. 140\1 12\1 122\1 119\1 116\1 114\1 6. / / / / / / 7. / / / / / / 4.2 tebook Table 3 demontate the eult of negotiation between notebook upplie and etaile with diffeent bagain powe. te that bagain powe of. to 7. i not applied fo the etaile and the upplie ince the negotiation i topped within the fit popoal fom the etaile. In table 3, no pice i equivalent in diffeent combination of bagain powe fo the upplie and the etaile. If both upplie and the etaile ae not willing to adjut thei pice, the negotiation will be teminated without any ageement. If the upplie o the etaile can elax thei pice fo about 1%, then the etaile and the upplie might each ageement with bagain powe of 4. and 1. to 7., epectively. Table 3: tebook pice afte negotiation baed on diffeent bagain powe Supplie\ etaile 1. 2. 3. 4. 2. 3. 4. 140.3\26. 1477.2\. 1477.2\. 1477.2\. 97.2\14. 41.1\4. 3.9\72 1291.\1296 3.9\72 3.9\72 1290\1294. 1290\1294. Table 4 how the quantitie of DRAM afte negotiation. In table 4, the upplie and the etaile achieve ageement in quantitie poduced and puchaed. Table 1 and 2 indicate that ageement will be achieved if both ide can elax thei pice containt. ISSN: 207-09 (Pint); ISSN: 207-0966 (Online)
Poceeding of the Intenational MultiConfeence of Enginee and Compute Scientit 20 Vol II,, Mach -, 20, Hong Kong Table 4: tebook quantitie afte negotiation baed on diffeent bagain powe Supplie\ etaile 2. 3. 4. 1. 74/74 37/37 93/93 2. 70/70 70/70 74/74 3. 70/70 70/70 70/70 4. 70/70 70/70 70/70 Supply chain collaboation ha been tudied to achieve minimum cot among upply chain patne. Howeve, conflict among objective of upply chain patne ae uually exited that affect the uccefulne of collaboation. Theefoe, negotiation i uually adapted among upply chain patne to achieve an appopiate deciion. Thi eeach invetigate the elation of patne within in upply chain alliance baed on negotiation. Mathematical model ae povided to minimize the total cot of upply chain and to ealize the inight of implementing negotiation. Baed on ou model analyi, negotiation might each a deciion among upply chain patne. Refeence [1] J. C. Andeon and A. Nau, A model of ditibuto fim and manufactue fim woking patnehip, Jounal of Maketing, 1990, vol. 4,42. [2] A. Cakavatia, I. S. Toha, and N. Nakamua, A two-tage model fo the deign of upply chain netwok, Intenational Jounal of Poduction Economic, 2002, vol. 0, 1-24. [3] G. Dudek and H. Stadtle, Negotiation-baed collaboative planning in divegent two-tie upply chain, Intenational Jounal of Poduction Reeach, 2007, vol. 4, no. 2, pp. 46-. [4] C. A. Embeon and J. Stoey, Buye upplie collaboative elationhip: Beyond the nomative account, Jounal of Puchaing and Supply Management, 2006, vol. 12, no., pp. 6 24. [] D. Z. Feng and M. Yamahio, A pagmatic appoach fo optimal election of plantpecific poce plan in a vitual entepie, Poduction Planning & Contol, 2003, vol. 14, no. 6, pp. 62-70. [6] J. Hagedoon, Undetanding the ationale of tategic technology patneing : inteoganizational mode of coopeation and ectoal diffeence, Stategic Management Jounal, 1993, vol.14, no., pp.371-3. [7] H. Jung, B. Jeong and C. G. Lee, (200). An ode quantity negotiation model fo ditibuto-diven upply chain, Intenational Jounal of Poduction Economic, 200, vol. 111, pp. 147-. [] D. M. Lambet, M. A. Emmelhainz, and J. T. Gadne, Developing and Implementing Supply chain Patnehip, The Intenational Jounal of Logitic Management., 1996, vol. 7, no. 2, pp. 1-. [9] H. L. Lee, V. Padmanabhan, and S. Whang, Infomation Ditotion in Supply Chain: the Bullwhip Effect, Management Science, 1997, vol. 43, no. 4, pp. 46-. [10] H. A. Lai, Theoetical Bai fo Negotiation Suppot Sytem, Unpublihed doctoal dietation, Pudue Univeity. 199. [11] N. Lehoux, S. D Amou, and A. Langevin, Collaboation and deciion model fo a two-echelon upply chain: a cae tudy in the pulp and pape induty, Intenational Confeence on Indutial Engineeing and Sytem Management (IESM 07), Beijing, China, 2007. [12] J. Olhage, Supply chain management: a jut-in-time pepective, Poduction Planning & Contol, 2002, vol., no., pp. 61-67. [] S. Paad and F. Soundepandian, Facto influencing global upply chain efficiency: implication fo infomation ytem, Supply Chain Management: An Intenational Jounal, 2003, vol., pp. 241-20. [14] T. M. Simatupang, and R. Sidhaan, The collaboative upply chain, Intenational Jounal of Logitic Management, 2002, vol., no. 1, pp. -. [] D. Simchi-Levi, P. Kaminky, and E. Simchi-Levi, Deigning and Manging the Supply Chain, 2nd ed. McGaw Hill, Iwin, New Yok, NY, 2003. [16] H. A. Simon, Adminitative Behavio, 4th edition, New Yok, NY, 2007. [17] S. Tallui and R. C. Bake, A multi-phae mathematical pogamming appoach fo effective upply chain deign, Euopean Jounal of Opeational Reeach, 2002. vol. 141, pp. -. [] S. Tallui, R. C. Bake, and J. Saki, A famewok fo deigning efficient value chain netwok, Intenational Jounal of Poduction Economic, 1999, vol. 62, pp. 3-1. [19] B. L. Zhu, H. B. Yu, and X. Y. Huang, Integated poduction planning model and method fo upply chain, IEEE, 2007, pp. 4709-4712. [20] I. W. Zaman, The 0% olution, Ancho, New Yok City, NY, 1976. ISSN: 207-09 (Pint); ISSN: 207-0966 (Online)