Service Chain Coordination Using Salvage Manipulation

This paper introduces a new coordinating mechanism for a two-echelon service chain with a single service retailer and multiple suppliers. The retailer sells a bundled product with perishable demand to the end customer. Prior to the selling season, suppliers must make components available to the retailer, and the retailer must acquire capacity. The bundled components consist of service capacity at the retailer and products from the suppliers. We demonstrate our salvage manipulation mechanism using an example of a travel agency that provides vacation packages using components provided by suppliers in a service chain. Our mechanism is simple to calculate and does not require the use of burdensome revenue-sharing contracts