Research On Decision-making Of Optimal Capacity Restoration In An Assembly System With Supply Disruption Risk

This paper studies another effective and increasingly popular method in dealing with supply disruption risk – capacity restoration. In order to investigate the optimal capacity restoration decision of the assembly system, this paper does some detailed study in two aspects: the optimal capacity restoration decision at different incentive strategies and the optimal capacity restoration based on the cost-sharing stategy.In the research of the optimal capacity restoration decision of the assembly system at different incentive strategies, we construct a 1:1(one manufacturer and one supplier) profit maximization model. First of all, we deduce the optimal decisions of the manufacturer and the supplier under wholesale price incentive, bonus incentive and cost-sharing incentive, and we confirm the effectiveness of these three incentives in promoting the capacity amount restored, and we also find that the effects that bonus incentive and cost-sharing incentive exert on supplier’s capacity restoration are same. Then through numerical examples, we do a sensitivity analysis on the manufacturer, supplier and the supply chain’ optimal decisions to find that both the cost-sharing ratio and the growth of wholesales price decided by the manufacturer increase with the retail price and production cost, and the capacity amount decided by the supplier increases with the retail price but decreases with production cost. Besides, by comparative analysis, we get the following conclusions: under both incentive strategies, the profits of the manufacturer, supplier and the whole supply chain increase with the retail price and decrease with the wholesales price, and compared to the wholesale price incentives, all the manufacturer, supplier and the whole supply chain can get more profits under cost-sharing incentives, but this advantage is not obvious.In the research of the optimal capacity restoration decision of the assembly system based on the cost-sharing stategy, we construct a 2:1(two suppliers and one manufacturer) profit maximization model. We firstly dudce the manufacturer and suppliers’ optimal decisions separately when the manufacturer or the reliable supplier share the disruted supplier’s cost by analytical solutions, and find that the supplier’s capacity amount restored must not exceed the equilibrium initial production inputs of the two vendors, and also get the critical conditions under which the manufacturer or the reliable supplier is willing to share more cost. By comparative analysis, we show that for the manufacturer, he becomes more beneficial by sharing the restoration cost when the retail price is relatively high. Otherwise, he can obtain a higher payoff when the reliable supplier shares the cost; In contrast, for the reliable supplier, she can be better off by sharing the restoration cost alone than by delegating this responsibility to the manufacturer if and only if the wholesale price is sufficiently high.For the whole supply chain, a higher sharing incentive leads to a higher supply chain equilibrium payoff.