Coordinating the assembly system based on compensation mechanism under supply disruption

A well-coordinated assembly system plays an important role in an enterprise's strategic management. As the uncertainty of the supply chain is increasing, coordinating the assembly system effectively under supply disruption becomes a critical success factor for a global supply chain system. In this study, we consider an assembly system with two suppliers and one manufacturer and formulate the model of each partner with bonus policy under supply disruption. The optimal decision of each partner is analyzed under decentralized decision. Then we optimize the total cost of assembly system under centralized decision which is regarded as the benchmark. Furthermore, to achieve this benchmark, the compensation mechanism is designed to coordinate the assembly system under supply disruption. At last, the sensitivity is analyzed and the numerical analysis shows that our compensation mechanism is reasonable and effective.