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Coordinating a Semi-Centralized Global Production Network Through Different Levels of Headquarters Involvement

Publication ,  Journal Article
Liu, F; Song, JS
Published in: Production and Operations Management
February 1, 2017

Motivated by our experience with a global company, we propose and study the concept of a semi-centralized supply chain and analyze its coordination issues. We focus on a supply chain consisting of a home plant and a foreign branch, both of which are under the same parent company but have considerable autonomy. The role of the home plant is to provide a key component to the foreign branch with guaranteed service (required by the headquarters). Because of a high fixed order cost, the branch orders the component rather infrequently, causing high expediting costs at the home plant. Our purpose is to help the headquarters to improve the supply chain efficiency. We show that under certain conditions, the headquarters can coordinate the supply chain by setting an upper bound on the expediting frequency. If these conditions fail to hold, a simple fixed cost-sharing contract coordinates the supply chain. When centralized control is too costly or infeasible, the headquarters may delegate the contract design rights to the subunits. If the home plant receives the rights, the supply chain performance can be significantly improved (sometimes to near optimality). These results provide guidance to the headquarters on whether, when, and to whom to delegate the coordination initiatives.

Duke Scholars

Published In

Production and Operations Management

DOI

EISSN

1937-5956

ISSN

1059-1478

Publication Date

February 1, 2017

Volume

26

Issue

2

Start / End Page

305 / 319

Related Subject Headings

  • Operations Research
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1503 Business and Management
  • 0102 Applied Mathematics
 

Citation

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Liu, F., & Song, J. S. (2017). Coordinating a Semi-Centralized Global Production Network Through Different Levels of Headquarters Involvement. Production and Operations Management, 26(2), 305–319. https://doi.org/10.1111/poms.12630
Liu, F., and J. S. Song. “Coordinating a Semi-Centralized Global Production Network Through Different Levels of Headquarters Involvement.” Production and Operations Management 26, no. 2 (February 1, 2017): 305–19. https://doi.org/10.1111/poms.12630.
Liu F, Song JS. Coordinating a Semi-Centralized Global Production Network Through Different Levels of Headquarters Involvement. Production and Operations Management. 2017 Feb 1;26(2):305–19.
Liu, F., and J. S. Song. “Coordinating a Semi-Centralized Global Production Network Through Different Levels of Headquarters Involvement.” Production and Operations Management, vol. 26, no. 2, Feb. 2017, pp. 305–19. Scopus, doi:10.1111/poms.12630.
Liu F, Song JS. Coordinating a Semi-Centralized Global Production Network Through Different Levels of Headquarters Involvement. Production and Operations Management. 2017 Feb 1;26(2):305–319.
Journal cover image

Published In

Production and Operations Management

DOI

EISSN

1937-5956

ISSN

1059-1478

Publication Date

February 1, 2017

Volume

26

Issue

2

Start / End Page

305 / 319

Related Subject Headings

  • Operations Research
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1503 Business and Management
  • 0102 Applied Mathematics