Dynamic coalition reformation for adaptive demand and capacity sharing

To deal with volatile product demand and rapidly changing manufacturing technologies for sustainable returns, selective collaboration among companies in supply networks (SNs) is required. Recently, demand and capacity sharing among independent and non-competitive manufacturers, at the same horizontal layer in SNs, has been studied. Through an appropriate coalition for collaborative demand and capacity sharing, manufacturers can minimize their lost sales, as well as maximize production capacity utilization against lumpy real demand. In a previous study, we have developed the Collaborative Demand and Capacity Sharing (CDCS) protocol which addresses a long-term profitable and well-balanced collaboration for each manufacturer through distributed decision making. However, the uncertainty of circumstances calls for an effective and timely reformation of coalitions. In reality, there is a trade-off between frequent accommodation to changeable environments and high additional costs incurred by reformation. Hence, in this paper, we design the Adaptive CDCS protocol based on dynamic contract mechanism. In each period, our protocol suggests whether to reform existing coalitions or not based on theoretical analyses of long-term expected net profit. To evaluate its performance, a numerical experiment is conducted by comparing three models: no collaboration, static collaboration, and dynamic collaboration by Adaptive CDCS protocol. Dynamic collaboration results in more profits and its balanced redistribution by accommodating with changeable conditions.