Game Theoretic Strategies for Supplier Capability Assessment and Manufacturing Order Allocation

Abstract

An effective method is required to determine the amount and priority for the deployment of suppliers for multiple manufacturing processes, particularly when the available budget for each manufacturing process is limited. In this study, we propose an integrated approach for supplier assessment that consists of two game theory models which are designed to recommend manufacturers on how best to choose suppliers given budgetary limitations. In the first model, the interactive behaviors between the key factors representing the manufacturer and the supplier are modeled and analyzed as a two-player and zero-sum game, after which the Supplier Power Value (SPV) is derived from the pure or mixed strategy Nash equilibrium. In the second model, 12 SPVs are used to compute a Shapley value for each supplier, in terms of the thresholds of the majority levels in one manufacturing process. The Shapley values are then applied to create an allocated set of limited manufacturing orders for suppliers. The experimental results present that the manufacturer can use our approach to quantitatively evaluate the suppliers and easily allocate suppliers within one manufacturing process.

Examining the Effects of Organizations Competencies and Opportunistic Behaviors on Firm Performance in a Competitive Environment

“…On the other hand, dynamic capabilities are those used to expand, alter, or make routine capabilities (Teece, 2018). When the firm is merged with a supplier's capability base, it becomes much easier to emulate the residue parts to carry out supplier activities within the company (Wu & Chuang, 2020). Thus, the conceptualization of capability similarity is the stage to which the procurement firm has a dynamic competence that can be employed as an accelerator in the internal learning procedure of how to uncover and mimic the particular capabilities a supplier possesses (Gulbrandsen et al, 2017).…”