Supply contract modeling for a decentralized assembly system

Abstract

Supply chain is increasingly becoming a complex process due to global links for production and distribution. When a final product producer seeks specified quantities of parts or modules from various suppliers, delivery of the stated quantities may be constrained by suppliers' own capacity constraints and cost structures. In such cases, suppliers tend to supply the quantities that best match their optimal scenario. However, if the suppliers are given this choice without any coordination, there will be various quantities of parts received from different suppliers. This can create mismatch of components and therefore affect the potential to obtain optimum benefit from a supply chain since, in such a system, the production of final product depends on the minimum number of unique components supplied by any supplier.