Inter-company collaboration and coordination of supply chain operations can lead to strategic and operational benefits

Coordination of decisions on supply chain operations between firms can improve supply chain performance, according to Bas Verheijen’s dissertation ‘Vendor-Buyer Coordination in Supply Chains’. Verheijen studied the impact of resources of limited capacity, such as trucks, on supply chain operations and costs. Transport costs are studied in detail, as transports costs may be significantly reduced by improving supply chain coordination. Furthermore, he shows how a simple form of incentive alignment between firms in a supply chain can lead to near-optimal supply chain operation.

Advanced forms of supply chain collaboration (such as VMI) may lead to benefits on an operational and strategic level, under conditions for exchange of information and the strategic position of each firm. The expected benefits from supply chain collaboration are higher for firms organising their own transport than for firms who outsource transport to a third party logistics provider. In his thesis, Verheijen models an allocation mechanism for transport costs with reasonable transport tariffs as a result.

Bas Verheijen has defended his dissertation on May 21, 2010 at Rotterdam School of Management, Erasmus University. His promoter is <link people jo-van-nunen-in-memoriam-12-5-2010 _blank>Prof.dr.ir. J.A.E.E. van Nunen, Professor of Operations Research and Information Sciences, Rotterdam School of Management, Erasmus University. Co-promotor is dr. R. Kuik. Other members of the Doctoral Committee are Prof.dr. S.L. van de Velde, Prof.dr.ir. R. Dekker and Prof.dr. J. Wijngaard.

About Bas Verheijen

Bas Verheijen was born in Cuijk, the Netherlands, on March 28, 1975. He obtained his pre-university education (Atheneum) at the Merlet College in Cuijk in 1993. Bas studied Applied Physics at the Eindhoven University of Technology, the Netherlands. During his studies, he spent four months in Sydney, Australia, to research optical fibers. He conducted research for his Master’s project at Philips Research on the electro-wetting effect, obtaining his Master’s degree in 1999. The results of this research appeared in two articles (Verheijen and Prins, 1999a, and Verheijen and Prins, 1999b).

Bas then worked as an associate research fellow at the Gintic Institute of Manufacturing Technology in Singapore, in the laser research group. In 2000, he joined SSMC, a new semiconductor waferfab in Singapore, where he worked in process engineering and enjoyed his role as a linking pin for technology transfers from the mother-fab at Philips Semiconductors in Nijmegen to SSMC.

In February 2003, Bas became a PhD candidate at the Department of Decision and Information Sciences of the Rotterdam School of Management, Erasmus University. He co-organized the 8th International Workshop on Distribution Logistics in 2004. He has attended and presented his research at major international conferences and workshops, such as the International Society for Inventory Research in Budapest, Hungary the 3rd US-European Workshop on Logistics and Supply Chain Management in 2005 in Berkeley, California, and the International Workshop of Distribution Logistics (IWDL) in 2006 in Brescia, Italy. A paper that is based on Chapter 4 is currently under review at the International Journal for Production Economics.

Bas is currently working for NXP Semiconductors in Eindhoven, The Netherlands, managing international projects in supply chain management.

Abstract

Collaboration between firms in order to coordinate supply chain operations can lead to both strategic and operational benefits. Many advanced forms of collaboration arrangements between firms exist with the aim to reap these benefits. This dissertation contributes to the understanding of the conditions that are necessary for collaboration in such arrangements and the benefits that can be realized of such collaboration arrangement by coordinating supply chain decisions. This dissertation focuses on the vendor-buyer dyad in the supply chain. We identify and categorize collaboration arrangements that exist in practice, based on a review of the literature and combine this with formal analytical models in the literature. An important factor in the benefits of collaboration is the benefit of reduced costs of transport, by realization of economies of scale in the context of capacity-constrained trucks. As a contribution to the understanding of the dependence of transport costs on the volume transported, we demonstrate how transport tariffs for orders of less-than-a-truckload in size on a single link can be deduced from a basic model. The success of a collaboration arrangement depends on agreement about the distribution of decision authority and collaboration-benefits. We study a collaboration arrangement in which the vendor takes responsibility for managing the buyer's inventory and makes it economically attractive to the buyer by offering a financial incentive to the buyer, dependent on the maximum level the buyer permits to be stocked. This dissertation demonstrates that this incentive alignment leads to considerable cost savings and near-optimal supply chain decisions.

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