Multiproduct Supply Chain Horizontal Network Integration: Models, Theory, and Computational Results

Abstract

In this paper, we develop multiproduct supply chain network models with explicit capacities, prior to and post their horizontal integration. In addition, we propose a measure, which allows one to quantify and assess, from a supply chain network perspective, the synergy benefits associated with the integration of multiproduct firms through mergers/ acquisitions. We utilize a system-optimization perspective for the model development and provide the variational inequality formulations, which are then utilized to propose a computational procedure which fully exploits the underlying network structure. We illustrate the theoretical and computational framework with numerical examples.

This paper is a contribution to the literatures of supply chain integration and mergers and acquisitions.

Keywords: multiproduct supply chains, horizontal integration, mergers and acquisitions, total cost minimization, synergy

JEL Classification: G34, C61