Research On Supply Chain Coordination In The Perspective Of Cost Management

Supply chain is a typical system which is needed to be coordinated. By using the supply chain coordination mechanisms based on cost management, the overall costs will be minimized and the total profits will be maximized and firms in the supply chain will get a multi-win goal. So, this thesis analyzes the supply chain coordination between the core enterprise and its downstream and upstream respectively in the perspective of cost management,In the coordination process between the manufacturer and its suppliers, the suppliers can usefully to be divided into three categories—strategic partnership providers, major suppliers, subcontractor and the general contractor according to the level of inter- dependence between them, the bilateral commitment and how much do they involve. To some extent, the firm's relation type affects the choice of cost management method, and the contribution they make to the cost reduction increases as they become closer. If they are not the strategic partners, the core enterprise usually chooses cost sharing as the coordination mechanism to encourage suppliers to participate in the production design. It has been concluded that there is a Pareto improvement in which the supply chain can gain more than the non- cooperation. Moreover, the cost sharing ratio is influenced by the risk averse attitude and the bargaining power.In the coordination process between the manufacturer and its retailers, firstly, the method of comparative analysis of supply chain cost is taken. We compare the operating costs between the condition of non-cooperation and cooperation in the supply chain. Our analysis suggests that both the operating cost of the manufacturer and the total operating costs in the supply chain are reduced under the cooperation condition, while the operating costs of the retailers are increased. So the cost allocation is necessary. Secondly, the cost allocation coefficient range is given to allocation the total costs in order to reduce each firm's cost in the supply chain. Then, after the numeral simulation, we find that the retailers' order cycle become shorter and the order lot-sizing are reduced with cooperation, both of which will reduce the supply chain operational risks, improve the supply chain practice efficiency .Finally, a equity cost allocation scheme is proposed.