EURO 2024 Copenhagen
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364. Cooperative Adoption of Supply Chain Traceability

Invited abstract in session WA-24: Sustainable Supply Chain Management, stream Sustainable Supply Chains.

Wednesday, 8:30-10:00
Room: 83 (building: 116)

Authors (first author is the speaker)

1. Sanjith Gopalakrishnan
Desautels Faculty of Management, McGill University
2. Devpriyo Ray
Indian Institute of Management, Ahmedabad
3. Sriram Sankaranarayanan
Indian Institute of Management

Abstract

Traceability — the ability to track products from origin to consumption — is viewed as an essential first step in effective control and compliance relating to environmental and labour obligations along the supply chain. Despite such benefits, the widespread adoption of traceability technologies in supply chains is hindered by challenges including the high costs of adoption and the misalignment between entities incurring these costs and those reaping the benefits. We consider a network game-theoretic model of traceability technology adoption with possibly overlapping supply chains of multiple consumer-facing firms. We characterize the network-optimal adoption strategy with a tractable integer linear formulation. We then develop a cost sharing mechanism implementable via transfer payments to upstream suppliers. The cost sharing mechanism satisfies certain formal fairness properties, and, when efficient, supports the network optimal adoption strategy, and when inefficient, supports an equilibrium welfare which can be less than the network optimal welfare, and the ratio (a measure analogous to the price of anarchy for an associated non-cooperative game) is examined numerically using real-world supply chain structure data. A central theme of our work is to advance cost sharing, implementable via simple upstream transfer payments, as a complementary solution to the seeding strategy to initiate the diffusion of traceability technology in supply chains.

Keywords

Status: accepted

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