Coordination mechanisms for digital and sustainable textile supply chain

Purpose Supply chain network is complicated to manage due to the involvement of a number of agents. Formation of virtual organization using Industry 4.0 (I4.0) is an approach to improve the efficiency and effectiveness and to overcome the complexities of the channel. However, the task of managing the channel further becomes complicated after incorporating sustainability into the supply chain. To fill this gap, this paper focuses on designing of mechanism and demonstration of I4.0-based virtual organization to coordinate sustainable supply chain. Design/methodology/approach In this paper, we model and compare I4.0-based virtual organization models using four other traditional contracts with centralized supply chain. The non-cooperative game theoretic approach has been used for the analysis of models. Findings Our game-theoretic analysis shows that investment in I4.0 and sustainable innovation are beneficial for the overall supply chain. Our results show that linear two-part tariff contract and I4.0-based virtual organization model can perfectly coordinated with the supply chain. Research limitations/implications This study consider deterministic model settings with full information game. Therefore researchers are encouraged to study I4.0-based coordination models under information asymmetry and uncertain situations. Practical implications The paper includes implications for the development of I4.0-based coordination model to tackle the problems of channel coordination. Originality/value This study proposes I4.0-based game-theoretic model for the sustainable supply chain coordination.