Title: Incentive compatible mechanisms for decentralised Supply Chain Formation

Authors: Y. Narahari, N. Hemachandra, Nikesh Kumar Srivastava, Devadatta M. Kulkarni, Jeffrey D. Tew

Addresses: Department of Computer Science and Automation, Indian Institute of Science, Bangalore, India. ' Industrial Engineering and Operations Research, Indian Institute of Technology Bombay, Mumbai, India. ' Department of Computer Science and Automation, Indian Institute of Science, Bangalore, India. ' GM R&D Center, Warren, Michigan, USA. ' GM R&D Center, Warren, Michigan, USA

Abstract: In this paper, we consider a decentralised supply chain formation problem for multi-echelon supply chains when the managers of the individual echelons are rational and intelligent. At each echelon, there is a choice of service providers and the specific problem we solve is that of determining a cost-optimal mix of service providers so as to achieve a desired level of end-to-end delivery performance. In this paper, we develop a mechanism design framework for addressing this problem and propose two incentive compatible mechanisms: Supply Chain Formation – Dominant Strategy Incentive Compatibility (SCF-DSIC) and Supply Chain Formation – Bayesian Incentive Compatibility (SCF-BIC). We illustrate the efficacy of the proposed methodology using the example of a three echelon manufacturing supply chain.

Keywords: supply chain planning; Groves mechanisms; dAGVA mechanisms; d|Aspremont and Gerard-Varet; incentive compatibility; decentralised supply chains; supply chain formation; supply chain management; SCM; multi-echelon supply chains.

DOI: 10.1504/IJOR.2009.026242

International Journal of Operational Research, 2009 Vol.6 No.1, pp.27 - 53

Published online: 30 May 2009 *

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