Supply Chain Efficiency Analysis: A Theoretical Approach

Abstract

We divide the supply chain into a central control system (CCS) case and a decentralized control system (DCS) case, and compare the supply chain efficiency with both the CCS case and the DCS case.  We find that the supply chain efficiency of a capital-intensive industry is better under the CCS case than under the DCS case.  Under the CCS case, the maximized supply chain efficiency can be reached by choosing either the lowest price that the upstream firm is willing to receive or the highest price that the downstream firm is willing to pay for intermediate goods.