Fuzzy principal-agent model for optimal supplier switching with asymmetric information
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ORIGINAL ARTICLE
Fuzzy principal-agent model for optimal supplier switching with asymmetric information Mingmao Hu • Baoen Guo • Haitao Liu
Received: 11 October 2013 / Accepted: 24 February 2014 Ó Springer-Verlag Berlin Heidelberg 2014
Abstract This paper studies a fuzzy principal-agent problem for supplier switching with taking into account the asymmetric information and the competition effect where the buying firm’s assessment to the entrant supplier’s cost is described as a fuzzy variable. The supplier switching model is set up to minimize the buying firm’s total procurement cost which includes the transfer payment to the entrant supplier, the payment to the incumbent supplier and the switching cost. Through the analysis of the participation constraint, the incentive compatibility constraint and the objective function, the equivalent model of the fuzzy principal-agent problem for supplier switching is proposed, and the optimal supplier switching strategy is obtained. It is shown that the competition effect would lead to a partial switching strategy. Additionally, the supplier switching decision under the symmetric information is also studied. Finally, an example is given to illustrate the effectiveness of the proposed model and the supplier switching strategy. Keywords Fuzzy optimization Principal-agent Supplier switching Asymmetric information
1 Introduction Buyer–supplier relationships play a key role in the success of a supply chain, and many companies often face the M. Hu (&) Department of Mechanical Engineering, Hubei University of Automotive Technology, Shiyan 442002, China e-mail: [email protected] B. Guo H. Liu College of Mathematics and Information Technology, Xingtai University, Xingtai 054001, China
problem of selecting the best supplier. Supplier selection strategy is one of the most widely researched areas with methodologies ranging from conceptual to empirical and modeling streams, numerous studies have addressed the issue of the supplier selection problem and procurement strategy [1, 9, 23, 24, 27]. When a product was purchased from the selected supplier for a period of time, the buying firms had to face the problem whether to switch part or all products to an alternative supplier. Burke et al. [3] found that single sourcing is a dominant strategy only when supplier capacities are large relative to the product demand and when the firm does not obtain diversification benefits. And Yu et al. [35] discussed the problem of a decisionmaking of a single or dual sourcing in the presence of supply chain disruption risks. Many researchers gave research on supply chain using optimization and optimal control theory, Ivanov and Sokolov [12] developed an original integrated model of production and transportation planning in the supply chain based on a combination of fundamental results of the modern optimal program control theory with the optimization methods of operation research. Ju and Chen [13] designed structure matrix (DSM) and an improved artificial immune network algorithm (aiNet) were devel
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