Auction-theoretic coordination of production planning in the supply chain

Most planning and optimization methods in manufacturing logistics assume ce ntralized or hierarchical decision-making using monolithic models. Motivate d by the increasing needs to coordinate diverse decision processes and syst ems, we investigate an auction-theoretic mechanism for production coordinat ion in a supply chain. Our effort focuses on structural mappings between ma thematical decomposition and iterative auction mechanisms wherein agents co mpete based on their local utilities, announced conflict pricing, and produ ction targets. Building upon the rich literature in optimization and auctio n-theoretic analysis, we investigate the advantages and limitations of this distributed decision scheme on a large set problem in supply chain product ion planning. Experimental results show that the proposed auction mechanism provides impressive improvement over the traditional monolithic method wit hout significant degradation to the solution quality.