From competitive to collaborative supply networks: A simulation study

Abstract

In a scenario where a vendor books its manufacturing capacity options to multiple retailers it is not unlikely that the vendor runs out of capacity and then it cannot serve more orders until future periods of time. This paper suggests that, once the vendor becomes a bottleneck for the network, it is possible to apply negotiation policies between the different retailers to allow re-allocation of options and then overcome this loose/loose situation. Two simple policies to carry out bookings through negotiation practices, allowing partial bookings and not allowing them, are presented in this study. The effectiveness of this approach is tested with a series of simulation experiments whose main results demonstrate that application of negotiation practices within the network when the vendor has not more available capacity to be booked leads to improve the service level, the overall profit and to diminish the sales opportunity cost.