Order Negotiation Within Two-tier Supply Chain Of Long Term Partnership

Negotiating changes on orders, when reasonable, is commonly practiced between manufacturers of long term partnerships in supply chain, and therefore calls for analytical support on information exchanges between them. This paper analyzes the processes of adaptive order negotiation on quantities that buyers and sellers respectively refer to information on their own inventories, available resources, internal and external demands, tentatively suggest their modifications in a mutual manner, and by iterative trials arrive at an agreement; specifically, comprehensive scenarios that may appear while applying the model are analyzed, as well as their corresponding solutions are proposed, e.g. each party proposes acceptable changes, and their proposals converge after finite iterations; a party propose acceptable changes, while the other party cannot do any better; a party proposes unacceptable changes, i.e. an order conflict scenario. The major building blocks of the model are each party's model of upper limit of cost, optimal cost, and their models for tradeoff, together with an order conflict resolution model proposed herein, they systematically form an extended model for automatized order negotiations between manufacturers. At scenarios of order conflict, the model adopts the minimal overall cost on supply chain as an initial relaxed solution that is then adjusted to maximize the utilizing rate of available resources to the extent of meeting the demand side as much as possible by using the simulation optimization approach. Finally, the model is validated by numerical examples of various scenarios. In the end, we compare to the SMEs supply chain coordination in the process innovation and product innovation and make suggestions: For a long-term survival and development in the market, on the one hand, SMEs improve the core competitiveness through process innovation and product innovation; on the other hand, SMEs strive for the funding or policy support of the government or the cooperation from enterprises in supply chain to get more stable environment for development.