2019-01-02 | Chengzhang Li ：Implementing Environmental and Social Responsibility Programs in Supply Networks through Multi-Unit Bilateral Negotiation
Involving suppliers deep in the supply chain is critical for the success of environmental and social responsibility (ESR) initiatives. Administering ESR programs throughout a complex supply network, however, is challenging. In this paper, we apply a bilateral bargaining framework to analyze to what extent an ESR initiator should directly engage higher-tier suppliers, as opposed to delegating the assurance of ESR compliance to its first-tier suppliers. Our bargaining framework not only generalizes the conventional Shapley value approach by allowing the flexibility of modeling imbalanced power distribution among the firms, but also provides an explicit way of implementing the resulting gain sharing among the firms through negotiated contract terms. We show that the eventual structure of negotiation relationships can be derived by finding a shortest path tree in the supply network with the arc cost defined as a monotone function of the negotiating parties' relative bargaining power. These developments allow us to analyze ESR implementation in generally extended supply networks.
Chengzhang Li is a Ph.D. candidate in Operations Management at the Krannert School of Management, Purdue University. Previously, he received his bachelor degree in Mechanical Engineering and Automation from Shanghai Jiao Tong University. His research interests center around supply chain management in the presence of uncertainty, ambiguity and strategic behavior. More specifically, his work focuses on network design for responsible sourcing, pricing and inventory management with product substitution and ambiguous information.