Game-theoretic approach to simultaneous configuration of platform products and supply chains with one manufacturing firm and multiple cooperative suppliers

Abstract

This paper deals with simultaneous configuration of platform products and supply chains. The supply chain consists of one manufacturer and multiple cooperative suppliers. A common platform is shared for developing/configuring the product family with variant modules which are substitutable in the sense that high-performance module options can replace low-performance ones. As the customer in the supply chain, the manufacturer takes its leading role by making the first move to produce decisions on platform products configuration (PPC) and supplier selection. The manufacturer and concerned suppliers then move cooperatively to make their ordering and pricing decisions with a common objective to maximize their joint payoffs. We derive the optimal solution ranges for this two-moves dynamic game according to Nash's bargaining model. An iterative algorithm is developed to find the subgame perfect equilibrium. A numerical study is conducted through a series of simulation experiments to illustrate how useful insights about the mutual impacts between the PPC and SCC (supply chain configuration) decisions can be obtained from the proposed game models and solution procedure. The results are further compared with those obtained in a previous study with non-cooperative suppliers. The comparative study allows us to appreciate managerial measures under different supply chain coordination schemes. It is found that a supply chain with cooperative suppliers is more effective by using the lot-for-lot policy and more competitive by accommodating higher product variety. © 2009 Elsevier B.V. All rights reserved.