Two-stage game-theoretic approach to supplier evaluation, selection, and order assignment

Document Type : Article

Authors

1 Department of Distribution Management, Takming University of Science and Technology, Taipei 114, Taiwan, ROC

2 Department of Industrial and System Engineering, Chung Yuan Christian University, Chungli 32023, Taiwan, ROC

3 - Department of Industrial and System Engineering, Chung Yuan Christian University, Chungli 32023, Taiwan, ROC - Department of Industrial Engineering, Universitas Atma Jaya Yogyakarta, Yogyakarta 55281, Indonesia

Abstract

This study proposes a framework for supplier evaluation, selection, and assignment that incorporates a two-stage game-theoretic approach method. The objective is to provide insights to manufacturers in choosing suitable suppliers for different manufacturing processes. The framework applies to the decision logic of multiple manufacturing processes. In the first stage, a non-cooperative game model is utilized for supplier evaluation and selection. The interactive behaviors between a manufacturer and some supplier candidates are modeled and analyzed so that the supplier evaluation value (SEV) can be obtained using the Nash equilibrium. In the second stage, the supplier evaluation values become the input for the Shepley values calculation of each supplier under a cooperative game model. The Shapley values are utilized to create a set of limited supplier allocation. This paper provides managerial insights to verify the proposed approach on supplier selection and allocation. Thus enables SCM manager to optimize supplier evaluation, selection, and order assignment.

Keywords


References
1. Keyvanloo, M., Kimiagari, A.M., and Esfahanipour,
A. Risk analysis of sourcing problem using stochastic
programming", Scientia Iranica, Transaction E: Industrial
Engineering, 21(3), pp. 1034{1043 (2014).
2. Choi, T.Y. and Hartley, J.L. An exploration of
supplier selection practices across the supply chain",
Journal of Operations Management, 14(4), pp. 333{
343 (1996).
3. Rao, C.J., Zheng, J.J., Hu, Z., and Goh, M. Compound
mechanism design in multi-attribute and multisource
procurement of electricity coal", Scientia Iranica,
Transactions E: Industrial Engineering, 23(3), pp.
1384{1398 (2016).
4. Dickson, G.W. An analysis of vendor selection systems
and decisions", Journal of Purchasing, 2(1), pp.
5{17 (1966).
5. Weber, C.A., Current, J.R., and Benton, W.C. Vendor
selection criteria and methods", European Journal
of Operational Research, 50(1), pp. 2{18 (1991).
6. Weber, M., Hiete, M., Lauer, L., and Rentz, O.
Low cost country sourcing and its e ects on the
total cost of ownership structure for a medical devices
manufacturer", Journal of Purchasing and Supply
Management, 16(1), pp. 4{16 (2010).
7. Maurizio, B. and Alberto, P. From traditional purchasing
to supplier management: A fuzzy logic-based
approach to supplier selection", International Journal
of Logistics, 5(3), pp. 235{255 (2002).
8. Chan, T.S.F. and Kumar, N. Global supplier development
considering risk factors using fuzzy extended
AHP-based approach", Omega, 35(4), pp. 417{431
(2007).
9. Freeman, J. and Chen, T. Green supplier selection
using an AHP-Entropy-TOPSIS framework", Supply
Chain Management: An International Journal, 20(2),
pp. 327{340 (2015).
10. Neyestani, M.S., Jolai, F., and Golmakani, H.R. An
evolutionary algorithm for supplier order allocation
with fuzzy parameters considering linear and volume
discount", Scientia Iranica, Transaction E: Industrial
Engineering, 22(3), pp. 1130{1141 (2015).
11. Hosseini, S. and Barker, K. A Bayesian network
model for resilience-based supplier selection", International
Journal of Production Economics, 180, pp.
68{87 (2016).
12. Tezenji, F.R., Mohammadi, M., Pasandideh, S.H.R.,
and Koupaei, M.N. An integrated model for supplier
location-selection and order allocation under capacity
constraints in an uncertain environment", Scientia
Iranica, Transactions E: Industrial Engineering,
23(6), pp. 3009{3025 (2016).
13. Wetzstein, A., Hartmann, E., Benton Jr., W.C.,
and Hohenstein, N.O. A systematic assessment of
supplier selection literature - State-of-the-art and future
scope", International Journal of Production Economics,
182, pp. 304{323 (2016).
14. Zaheri, F., Zandieh, M., and Taghavifard, M.T. Bilevel
programming for supplier selection under quantity
discount policy", Scientia Iranica, Transactions E:
Industrial Engineering, 24(4), pp. 2095{2104 (2017).
15. Adeinat, H. and Ventura, J.A. Integrated pricing
and supplier selection in a two-stage supply chain",
International Journal of Production Economics, 201,
pp. 193{202 (2018).
16. Rabieh, M., Modarres, M., and Azar, A. Robustfuzzy
model for supplier selection under uncertainty:
An application to the automobile industry", Scientia
Iranica, Transactions E: Industrial Engineering,
25(4), pp. 2297{2311 (2018).
17. Mohammaditabar, D., Ghodsypour, S.H., and Hafezalkotob,
A. A game theoretic analysis in capacityconstrained
supplier-selection and cooperation by considering
the total supply chain inventory costs", International
Journal of Production Economics, 181, pp.
87{97 (2016).
18. Liu, T., Deng, Y., and Chan, F. Evidential supplier
selection based on DEMATEL and game theory",
International Journal of Fuzzy System, 20(4), pp.
1321{1333 (2018).
19. Von Neumann, J. and Morgenstern, O., Theory of
Games and Economic Behavior, Princeton University
Press, Princeton, New Jersey (1944).
20. Nash, J. Non-cooperative games", Annals of Mathematics,
54(2), pp. 286{295 (1951).
J.C.P. Yu et al./Scientia Iranica, Transactions E: Industrial Engineering 28 (2021) 3513{3524 3523
21. LaValle, S.M., Planning Algorithms, Cambridge University
Press, Cambridge, New York (2006).
22. Shapley, L.S. A value for n-person games", In Contributions
to the Theory of Games Vol. II H.W. Kuhn and
A.W. Tucker, Princeton University Press, Princeton,
New Jersey (1953).
23. Roth, A.E., The Shapley Value: Essays in Honor
of Lloyd S. Shapley, Cambridge University Press,
Cambridge, New York (1988).
24. Samuelson, L. Game theory in economics and beyond",
Journal of Economic Perspectives, 30(4), pp.
107{130 (2016).
25. Fudenberg, D. and Levine, D.K. Whither game theory?
Towards a theory of learning in games", Journal
of Economic Perspectives, 30(4), pp. 151{170 (2016).
26. Dixit, A.K., Skeath, S., and Reiley Jr., D.H., Games
of Strategy, 4th Ed., W. W. Norton & Company, New
York (2015).
27. Huang, Z. and Li, S.X. Co-op advertising model in
manufacturer-retailer supply chains: A game theory
approach", European Journal of Operation Research,
135(3), pp. 527{544 (2001).
28. Leng, M. and Parlar, M. Game theoretic applications
in supply chain management: A review", INFOR,
43(3), pp. 187{220 (2005).
29. Peldschus, F. and Zavadskas, E.K. Fuzzy matrix
games multi-criteria model for decision-making in engineering",
Informatica, 16(1), pp. 107{120 (2005).
30. Hennet, J.C. and Arda, Y. Supply chain coordination:
A game-theory approach", Engineering Applications of
Arti cial Intelligence, 21(3), pp. 399{405 (2008).
31. Bompard, E., Carpaneto, E., Ciwei, G., et al. A
game theory simulator for assessing the performances
of competitive electricity markets", Electric Power
Systems Research, 78(2), pp. 217{227 (2008).
32. Long, R. and Yu, L. Study on regulation design about
energy-saving and emission-reduction based on game
theory", Procedia Earth and Planetary Science, 1(1),
pp. 1641{1646 (2009).
33. Chen, Y.M., Wu, D., and Wu, C.K. A game theory
approach for evaluating terrorist threats and deploying
response agents in urban environments", Journal of
Homeland Security and Emergency Management, 6(1),
Article 31, pp. 1{25 (2009).
34. Runyan, P., Heping, W., Zhengping, W., and Yu,
L. Decision-making of aircraft optimum con guration
utilizing multi-dimensional game theory", Chinese
Journal of Aeronautics, 23(2), pp. 194{197 (2010).
35. Madani, K. Game theory and water resources", Journal
of Hydrology, 381(3{4), pp. 225{238 (2010).
36. Charilas, D.E. and Panagopoulos, A.D. A survey
on game theory applications in wireless networks",
Computer Networks, 54(18), pp. 3421{3430 (2010).
37. Sharma, R. and Gopal, M. Synergizing reinforcement
learning and game theory - A new direction for
control", Applied Soft Computing, 10(3), pp. 675{688
(2010).
38. Dayi, H. and Jianwei, G. Carbon abatement game
between regulator and  rms", Energy Procedia, 5, pp.
1859{1863 (2011).
39. Liu, W.Y., Yue, K., Wu, T.Y., and Wei, M.J. An
approach for multi-objective categorization based on
the game theory and Markov process", Applied Soft
Computing, 11(6), pp. 4087{4096 (2011).
40. Tiwari, S., Cardenas-Barron, L.E., Goh, M., and
Shaikh, A.A. Joint pricing and inventory model for
deteriorating items with expiration dates and partial
backlogging under two-level partial trade credits in
supply chain", International Journal of Production
Economics, 200, pp. 16{36 (2018).
41. Tiwari, S., Cardenas-Barron, L.E., Khanna, A., and
Jaggi, C.K. Impact of trade credit and in
ation
on retailer's ordering policies for non-instantaneous
deteriorating items in a two-warehouse environment",
International Journal of Production Economics, 176,
pp. 154{169 (2016).
42. Tiwari, S., Jaggi, C.K., Bhunia, A.K., et al. Twowarehouse
inventory model for non-instantaneous deteriorating
items with stock-dependent demand and
in
ation using particle swarm optimization", Annals
of Operations Research, 254(1{2), pp. 401{423 (2017).
43. Tiwari, S., Jaggi, C.K., Gupta, M., and Cardenas-
Barron, L.E. Optimal pricing and lot-sizing policy for
supply chain system with deteriorating items under
limited storage capacity", International Journal of
Production Economics, 200, pp. 278{290 (2018).
44. Tiwari, S., Wee, H.M., and Sarkar, S. Lot-sizing
policies for defective and deteriorating items with
time-dependent demand and trade credit", European
Journal of Industrial Engineering, 11(5), pp. 683{703
(2017).
45. Jaggi, C.K., Tiwari, S., and Goel, S.K. Credit  nancing
in economic ordering policies for non-instantaneous
deteriorating items with price dependent demand and
two storage facilities", Annals of Operations Research,
248(1{2), pp. 253{280 (2017).
46. Gimenez, C. and Tachizawa, E. Extending sustainability
to suppliers: a systematic literature review",
Supply Chain Management, 17(5), pp. 531{543 (2012).
47. Tiwari, S., Daryanto, Y., and Wee, H.M. Sustainable
inventory management with deteriorating and imperfect
quality items considering carbon emission", Journal
of Cleaner Production, 192, pp. 281{292 (2018).
48. Rabieh, M., Rafsanjani, A.F., Babaei, L., and Esmaeili,
M. "Sustainable supplier selection and order
allocation: An integrated Delphi method, fuzzy topsis,
and multi-objective programming model", Scientia
Iranica, Transactions E: Industrial Engineering,
26(4), pp. 2524{2540 (2019).
49. Fiestras-Janeiro, M.G., Garcia J.I., Meca, A., and
Mosquera, M.A. Cooperative game theory and inventory
management", European Journal of Operational
Research, 210(3), pp. 459{466 (2011).
3524 J.C.P. Yu et al./Scientia Iranica, Transactions E: Industrial Engineering 28 (2021) 3513{3524
50. Zhao, R., Neighbour, G., Han, J., et al. Using game
theory to describe strategy selection for environmental
risk and carbon emissions reduction in the green supply
chain", Journal of Loss Prevention in the Process
Industries, 25(6), pp. 927{936 (2012).
51. Zhao, R., Neighbour, G., McGuire, M., and Deutz, P.
A software based simulation for cleaner production:
A game between manufacturers and government",
Journal of Loss Prevention in the Process Industries,
26(1), pp. 59{67 (2013).
52. Wu, P.I., Chen, C.T., Cheng, P.C., and Liou, J.L. Climate
game analyses for CO2 emission trading among
various world organization", Economic Modelling, 36,
pp. 441{446 (2014).
53. Sadigh, A.N., Chaharsooghi, S.K., and Sheikhmohammady,
M. Game-theoretic analysis of coordinating
pricing and marketing decisions in a multi-product
multi-echelon supply chain", Scientia Iranica, Transactions
E: Industrial Engineering, 23(3), pp. 1459{
1473 (2016).
54. Nazari, L., Seifbarghy, M., and Setak, M. Modeling
and analyzing pricing and inventory problem in
a closed-loop supply chain with return policy and
multiple manufacturers and multiple sales channels
using game theory", Scientia Iranica, Transaction E:
Industrial Engineering, 25(5), pp. 2759{2774 (2018).
55. Wu, C.K. A game theory approach for assessing risk
value and deploying search-and-rescue resources after
devastating tsunamis", Environmental Research, 162,
pp. 18{26 (2018).
56. Cheheltani, S.H. and Ebadzadeh, M.M. Immune
based approach to  nd mixed Nash equilibrium in
normal form games", Journal of Applied Sciences,
10(6), pp. 487{193 (2010).
57. Wu, C.K., DRAG: Deploying Response Resources for
MAS Agents Using Game Theory, Amazon Digital
Service LLC, Kindle Edition (2015).
58. El-Shazly, A. Strategic interaction between governments
and investors under privatization programs",
Managerial and Decision Economics, 33(1), pp. 29{38
(2012).
59. Alpcan, T. and Basar, T. Network security: A
decision and game-theoretic approach", Cambridge
University Press, Cambridge, New York (2010).
60. Kumar, A., Jain, V., and Kumar, S. A comprehensive
environment friendly approach for supplier selection",
Omega, 41(1), pp. 109{123 (2014).
61. Lamba, K., Singh, S.P., and Mishra, N. Integrated
decisions for supplier selection and lot-sizing considering
di erent carbon emission regulations in big data
environment", Computers & Industrial Engineering,
128, pp. 1052{1062 (2019).