Analysis of the Project Supply Chains: Coordination and Fair Allocation

This research investigates how project contracts can coordinate the supply chain between a project manager and contractor and if the solutions can be ensured as equitable. The main features of this type of supply chain are the trade-offs between the selection of a higher rate of resource consumption with a consequent higher cost to the contractor and a lower rate of resource consumption leading to later delivery and a reduction of the project-reward to the project manager. This broader problem could lead to a coordination problem for the overall supply chain. This research proposed a solution to this broader problem in two different scenarios: Take it or leave it scenario and negotiation scenario. Finally, the fair allocation of the risks and benefits and the related decision-making issues are addressed as one of the behavioural barriers to the supply chain coordination. The coordination issues in a take it or leave it scenario are addressed using time-based and fixed price project contracts using Stackelberg games. Models of coordination were proposed with time-based contracts, but the fixed price contracts failed to coordinate. The coordination problems in negotiation scenario are addressed with the Nash's bargaining, the Kalai Smorodinsky bargaining, and the utilitarian approach. A cost plus contract has been found to dominate the solutions over any cost sharing contract and fixed price contract for Nash's bargaining and Kalai Smorodinsky bargaining cases. Finally, the issues of fairness of allocation of risks and benefits as one of the challenges of supply chain coordination, have been investigated. The fixed price contracts were found to coordinate the supply chain under consideration alongside the time-based contracts if the members had fairness concern. Some of the key features of this research include the incorporation of various probability distributions for the project completion time and cost, the inclusion of various forms of risk preference, and addressing the challenges of fair allocation in project supply chains.