Buyer-supplier cooperation and negotiation support with random yield consideration

Peter Kelle, Sandra Transchel, Stefan Minner

Research output: Contribution to journalArticlepeer-review

35 Scopus citations

Abstract

Random yield is still prevailing in several industries despite quality improvement efforts. In this case, the supply chain partners jointly must find the best way to cope with yield uncertainty. We focus on the inventory-related costs that can be influenced by adjusting the ordering, setup, and delivery policy to the random yield. The yield model of having a random proportion of defective items is assumed with known mean and variance. Two alternative scenarios are examined: when the buyer or when the supplier makes 100% inspection. We provide analytic tools and approximations to optimize the decisions. Our main contribution is to help in the cooperation and negotiation process by showing under which circumstances have the yield characteristics important effects and when are they negligible. We show that not the average yield but the yield uncertainty plays the critical role mainly in providing an appropriate service level but also in finding the optimal shipment and setup policy.

Original languageEnglish
Pages (from-to)152-159
Number of pages8
JournalInternational Journal of Production Economics
Volume118
Issue number1
DOIs
StatePublished - Mar 2009
Externally publishedYes

Keywords

  • Cooperation
  • Inventory
  • Negotiation
  • Random yield
  • Supply chain

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