Values of the balanced decision making between supply chain partners

Abstract

Coordination between supply chain partners is critical to effective supply chain management. In this paper, we consider two cases of decision-making structure for a simple supply chain consisting of two players: the first case in which a supply chain partner dominates the decision-making process, and the other in which two players share the decision-making process equally. According to the literature, we know a priori that the balanced decision making forges a better (financial) outcome than the dominating case does. Therefore, our primary research objective is to analyze detailed dynamics of resource allocation and sources of the benefit of the balanced decision making. Our analysis indicates that the value of the balanced decision making arises from more effective resource utilization than the dominating case does: each of the cooperative partners knows how to optimize its resource utilization better than the other does.