To answer the need for such information many industry sectors are stated by Aydinliyim (2007) to have "created portals where key information is shared amongst the members of the network." (p.1) This enables the members of the supply chain to work in a manner of cooperation geared toward reduction of not only their individual costs but the costs of the entire supply chain as well. The following diagram illustrates this concept as cited in the work of Aydinliyim (2007).
Total Online Supply Chain Portal
Source: Aydinliyim (2007)
The work of Griffin, Keskinocak and Savasaneril (nd) entitled: "Improving Supply Chain Performance Through Buyer Collaboration" states that in many companies today purchasing is conducted by "multiple functional divisions which either act independently or have minimal interaction with each other." (p.3)
Griffin, Keskinocak and Savasaneril states that there are three collaboration models: (1) no collaboration in which buyer divisions and suppliers trade through traditional sales channels in one-to-one transactions with no existing information flow; (2) internal collaboration in which functions divisions of a buyer collaborate internally; and (3) full collaboration in which a third party intermediary enables collaboration among different buyers and allows the participants to achieve benefits from both economies of scale and scope due to reduced fixed production and transportation costs. (nd, p. 3) These three models are shown in the following illustration labeled Figure 2.
Three Models of Collaboration Among Buyers and Buyers Divisions
Source: Griffin, Keskinocak and Savasaneril (nd)
The work of Xu and Beamon entitled: "Supply Chain Coordination and Cooperation Mechanisms: An Attribute-Based Approach" states that the importance of coordination in supply chain management (CSM) "cannot be overemphasized." (p. 4) Supply chain management is defined as "the planning and coordination of activities, from procurement to production, through...distribution." (Xu and Beamon, 2006, p.4) According to Xu and Beamon "Coordination mechanisms may be differentiated on the bases of four attributes as follows: (1) resource sharing structure, (2) decision style, (3) level of control, and (4) risk/reward sharing. (Xu and Beamon, 2006, p.5)
Given that the selection of a coordination mechanism is often based on minimizing relative costs, transaction cost theory (TCT) can be used to classify the three types of costs associated with coordination: coordination cost, operational risk cost, and opportunistic risk cost. This facilitates relating each coordination mechanism attribute to a type of cost." (p. 5) the resource sharing structure is stated to include the following: (1) No resource sharing; (2) Operational resource sharing; (3) tactical resource sharing; and (4) strategic resource sharing. (Xu and Beamon, 2006, p. 6)
Stated as two primary sources of operational risk cost are: (1) shirking of the cost that arise; and (2) refusal to adapt. (Xu and Beamon, 2006, p.6) Opportunistic risk cost is identified as the "cost associated with a lack of bargaining power or a loss of bargaining power stemming directly from the execution of a relationship." (Xu and Beamon, 2006, p.6)
There are stated to be two primary sources of opportunistic risk cost which are the two of: (1) power asymmetries -- when a small supplier enters negotiation with a more powerful firm; and (2) loss of resource control -- when new partners acquire new technology resulting in a threat being posed of a competitive nature to the original partner. (Xu and Beamon, 2006, p. 6) Xu and Beamon state that the selection of a coordination mechanism is a "tactical-strategic decision. As such, it is intended to govern the medium to long-term coordination structure between organizations. As operating environments change, so too much the corresponding coordination mechanism." ( p.11)
It is clear from the brief review of literature in this work that supply chain management coordination between suppliers and buyers offers a great many advantages and that among these advantages reduction of cost of goods is of primary importance along with reductions in costs associated with shipping of supplies and inventory.
Arising from the brief review of literature in this research proposal is a recommendation that the study as proposed herein be conducted and specifically that the coordination of the suppliers and buyers in the supply chain be analyzed through use of the differential game theory methodology.
Lavelle, SM (2006) Planning Algorithms. Cambridge University Press. Online available at: http://planning.cs.uiuc.edu/node710.htmlDockner, E., Jorgensen, S. And Long, NV (2000) Differential games in economics and management science. Cambridge University Press, 2000
Xu, Lei and Beamon, Benita M. (2006) Supply Chain Coordination and Cooperation Mechanisms: an Attribute-Based Approach. The Journal of Supply Chain Management Winter 2006.