3 / 2019-05-04 13:11:27

Double time hedging and coordination in prefabricated construction

Operational hedging,Game theory,Supply chain coordination,Prefabrication production

In this paper, a dual time hedging coordination mechanism is investigated among a sales department, a manufacturing department and a logistics department. In order to ensure the on-time delivery, the sales manager requires both the manufacturer and the logistics provider to hedging its time uncertainty by reducing their time length. This strategy is referred to as “dual time hedging” strategy in this research. Although this strategy provides a means of protection towards tardiness delivery and profit loss, it adds more pressure to the manufacturing department and logistics department. Without proper incentives, these independent departments will leave this strategy. In order to solve the conflict caused by the dual time hedging strategy, the coordination mechanisms are developed. Especially, four decision scenarios are investigated and compared: (1) a global optimal model, where the system operates as if it is operating in a centralized fashion; (2) a sales department decision model, where the dual time hedging decisions are made by sales manager; (3) a Nash game model denoting an equal bargaining power setting; and (4) a Stackelberg game model, where both the manufacturing department and the logistics department are given a leading role. Close-form expressions of the optimal dual time hedging decisions and internal transfer terms are derived. Comparative analysis reveals that the pressure caused by adopting the dual time hedging can be mitigated by the proposed game mechanisms. Numerical studies further demonstrate that a win-win outcome is reached in two game models.