Abstract

In response to current economic downturn coupled with intense global competition, concept of supply chain collaboration has emerged as a possible solution for firms aiming to gain competitive advantage through cost reduction, increased asset utilization and improving service levels.

In this research, we have analytically examined and identified the stages involved in facilitating supply chain collaboration between multiple retailers and/or suppliers in a supply chain network. The study considers three types of collaboration strategies and incorporates a combination of different techniques such as cluster analysis, analytical network process (ANP) and game theory that can help potential partners to plan and implement collaboration initiatives in the supply chains. The solution approach along with illustrative example involving a retailer and a supplier is presented which can serve as a guideline for potential firms contemplating about entering into collaboration. In order to help prospective partners make the decision regarding which type of collaboration will be beneficial for them, a collaboration decision making model is built using C++ language. The collaboration decision making model incorporates concept of Nash equilibrium to ensure each partner is making the best decision while taking into consideration the decisions of others. Pre-qualification screening of potential suppliers and/or retailers for possible collaboration is carried out by utilizing methods such as cluster analysis and analytical network process (ANP) while final partner selection is made through application of game theory. Finally, profit allocation mechanism based on Shapley method is presented which ensures profit is distributed according to the “adding value” each partner brings for the alliance.