Values of the Balanced Decision-Making between Supply Chain Partners

Coordination between supply chain partners is viewed critical to effective supply chain management. Depending on the bargaining power balance between them, it is determined who will be able to exert more influence in making decisions related with such coordination. We consider two cases of the decision-making structure in the context of a simple supply chain consisting of two players, i.e., (1) the first case in which a supply chain partner dominates the decision-making process and the other passively follows the dominant player's decision, and (2) the other case in which the two players share the decision-making process equally. In this paper, we examine which of the cases is better for the companies and where comes the value of the better case. To answer the research questions, we set up an optimal control theory model and derive an analytical solution. The analysis outcome indicates that the shared decision-making in general produces better results for both companies in the supply chain, and the value of the shared decision-making comes from more effective resource utilization than the dominated case.