Coordinating a decentralized hybrid push-pull assembly system with unreliable supply and uncertain demand.

We consider a decentralized assembly system in which $$m+n$$ unreliable suppliers sell complementary components to an assembler, who faces a random demand. We assume that $$m$$ of these suppliers are more powerful than the assembler and sell components via push contracts, while the remaining $$n$$ suppliers are less powerful than the assembler and sell components via pull contracts. The supply chain operations are modelled by a three-stage game. We first characterize the equilibrium decisions of all chain members, and find that supply chain efficiency depends heavily on system parameters. We then develop a mechanism to coordinate the supply chain. The mechanism consists of two policies, including a buyback policy between push suppliers and the assembler, and a subsidy policy between the assembler and pull suppliers. We show that the mechanism can eliminate the two sources of 'double marginalization' that exist in the chain with unreliable supply and uncertain demand, and achieve Pareto improvements. [ABSTRACT FROM AUTHOR]