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Discrete Dynamics in Nature and Society
Volume 2013 (2013), Article ID 381987, 9 pages
http://dx.doi.org/10.1155/2013/381987
Research Article

Coordination in the Decentralized Assembly System with Dual Supply Modes

1Economic and Management School, Wuhan University, Wuhan 430000, China
2School of Business Administration, Hunan University, Changsha 410082, China

Received 27 June 2013; Revised 11 September 2013; Accepted 28 September 2013

Academic Editor: Tinggui Chen

Copyright © 2013 Xu Guan and Mengqi Liu. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper investigates a decentralized assembly system that consists of one assembler and two independent suppliers; wherein one supplier is perfectly reliable for the production, while the other generates yield uncertainty. Facing the random market demand, the assembler has to order the components from one supplier in advance and meanwhile requires the other supplier to deliver the components under VMI mode. We construct a Nash game between the supplier and the assembler so as to derive their equilibrium procurement/production strategies. The results show that the channel’s performance is highly undermined by the decentralization between players and also the combination of two supply modes. Compared to the centralized system, we propose an advance payment contract to perfectly coordinate the supply chain performance. The numerical examples indicate some management implications on the supply mode comparison and sensitivity analysis.