Coalition Formation for Horizontal Supply Chain Collaboration: A Multiobjective Approach

Abstract

By collaborating horizontally, firms are expected to achieve considerable improvement. Most optimization approaches in coalition-based supply chain collaboration are single objective targeting cost reduction or profit maximization. Real-world decision problems usually require the investigation of more than one criterion to achieve a sustainable progress. In this paper, we study the collaborative facility and fleet sharing among firms at the same horizontal layer of the supply networks and explore the benefits of forming coalitions. We consider the case of suppliers operating their own distribution centers. Such firms have incentives to minimize their operational costs by optimizing inventory levels at warehouses, replenishment process and distribution to customers. The aim is to look at the trade-off between cost of the logistic service (warehousing and transportation) and maintaining customer satisfaction and loyalty by keeping, when possible, delivery service internal to each firm. The problem is a coalition formation modeled as a cooperative multiobjective game.