Designing Cooperation Mechanisms for Supply Chains

The paper defines generic requirements towards cooperative planning in the nucleus of any supply network that is constituted by a pair of autonomous manufacturer and supplier who possess asymmetric information on demand forecast and costs, respectively. Then a novel way is suggested for investigating this problem by means of the apparatus of mechanism design. The analysis results in some provable generic properties as for efficiency and truthfulness, and shows the impossibility of fair cost and profit sharing. Further on, design principles towards a payment scheme are devised that provide incentive for the partners to cooperate in order to minimize costs. This payment can be considered the price for a flexible supply service. As examples, the generic framework is instantiated with two particular cooperative supply mechanisms.