International Order Negotiation in Two Tier Supply Chain of Manufactures

Abstract

The order negotiation are regular activities for a synergic operations planning between supply chains partners. As operations planning can usually be realized only for isolated parts of an overall supply chain, the question arises whether there are alternative negotiation ways of synergic operations planning. In this paper we propose a recursion-based order negotiation model which can be used to modify orders in the cooperation of the buyer and supplier according to their external orders, available resources and inventory, and for generating optimal results as obtained by supply chain system coordination. Three scenarios emerge in the application of the model: the solution is in the solution set (orders can be accepted by the other party); the solution is in the solution set, but cannot be further optimized; the solution is completely out of the solution set (called order conflicts). And under the three scenarios, we provide the corresponding solutions, especially for the order-conflict scenario. First, find an initial relaxation solution that minimizes overall cost of the supply chain as the reference solution. Second, maximize the utilization of production with a simulation optimization method to increase the purchase order. Then find an optimal solution which balance the supply and demand of both sides. Finally, the validity of the order negotiation model is verified in various situations by computational tests.