Coordination Mechanism Design for Sustainable Global Supply Networks

Abstract

This dissertation studies coordination mechanism design for sustainable supply networks in a globalized environment, with the goal of achieving long-term profitability, environmental friendliness and social responsibility. We examine three different types of supply networks in detail.The first network consists of one supplier and multiple retailers. The main issue is how to efficiently share a scarce resource, such as capacities for green technology, among all members with private information under dynamically changing environment. We design a shared surplus supply agreement among the members which can lead to both efficient private investments and efficient capacity allocation under unpredictable and unverifiable market conditions.The second network is a serial supply chain. The source node provides critical raw material (like coffee cherries) for the entire chain and is typically located in an underdeveloped economy, the end node is a retailer serving consumer at a developed economy (like Starbucks Co.). We construct a dynamic supply agreement that takes into account the changing market and production conditions to ensure fair compensations so that the partners have the right incentives to work together to develop sustainable quality supply.The third network is a stylized global production network of a multinational company consisting of a home plant and a foreign branch. The branch serves the foreign market but receives a key component from the home plant. The distinctive feature is that both facilities belong to the same company, governed by the headquarters, yet they each also have their own autonomies. We analyze the role of the headquarters in designing coordination mechanism to improve efficiency. We show the headquarters can delegate the coordination effort to the home plant, as long as it keeps veto power.