Shipment lead time hedging and coordination in prefabricated construction supply chain

Abstract

This paper aims to coordinate a shipment lead time hedging (SLTH) problem between a building contractor and a logistics provider in the prefabricated construction supply chain (PCSC). In the PCSC, untimely (early or late) delivery of prefabs can lead to project time and cost overruns. To mitigate this challenge, the building contractor requires the logistics provider to reduce the shipping time variability, which is termed the SLTH strategy. While this benefits the building contractor, it also puts more investment and operational pressures on the logistics provider. To solve this conflict, we introduce a coordination mechanism which involves two terms: an SLTH level related cost term is charged by the logistics provider to the building contractor, and a constant transfer term is adopted to fairly allocate the system surplus. Three decentralized models are investigated: i.e., two Stackelberg game models with alternative decision-making sequences and an equal power model. Further comparative analysis and numerical studies reveal that our proposed coordination mechanism increases the SLTH level and ensures a win–win situation. Moreover, some interesting managerial implications are derived.