Developing a resilient supply chain in complex product systems through investment in reliability and cooperative contracts

¹ Associate Professor, Management and Industrial Engineering Department Malek-Ashtar University of Technology
² KTP associate University of Plymouth

^* Corresponding author: kheljani@mut.ac.ir

Received: 18 February 2023
Accepted: 8 November 2023

Abstract

In recent years, finding mitigation strategies for supply chain disruptions has become one of the most critical challenges for businesses. This issue is crucial for complex product industries because of their role in the modern economy, few suppliers, and their need for high investment in research and development (R&D). This paper studies a resilient supply chain in complex product systems to overcome its specific challenges through supplier reliability enhancement and cooperative contracts. Utilising a game theoretic approach and analytical models, this paper aims to improve the supply chain performance from the resilience perspective while considering R&D investment, supplier learning effect, buyer fairness concern, and market sensitivity to the product’s technology. Investment in supplier reliability enhancement with different contracts is proposed to mitigate disruption risks for a two-echelon supply chain. Analytical mathematical models have been developed, and a simulation approach has been used in optimisation. The results show how proposed contracts effectively increase supply chain performance from financial and resilience perspectives. Moreover, the market sensitivity to the product’s technological level and the sensitivity to the price could adversely affect performance. The buyer’s fairness concern also improves the profit loss while decreasing the service level slightly.