The General Multitiered Supply Chain Network Model with Performance Indicators

Abstract

This chapter begins Part IV of this book, which is on supplier quality and freight service quality. In order to set the stage for quality competition with suppliers in Chap. 10, in this chapter we present a multitiered competitive supply chain network game theory model, which includes the supplier tier. The firms are differentiated by brands and can produce their own components, as reflected by their capacities, and/or obtain components from one or more suppliers, who also are capacitated. The firms compete in a Cournot-Nash fashion, whereas the suppliers compete a la Bertrand since firms are sensitive to prices. All decision-makers seek to maximize their profits with consumers reflecting their preferences through the demand price functions associated with the demand markets for the firms’ products. We construct supply chain network performance measures for the full supply chain and the individual firm levels that assess the efficiency of the supply chain or firm, respectively. They allow for the identification and ranking of the importance of suppliers as well as the components of suppliers with respect to the full supply chain or individual firm. The framework is illustrated through a series of numerical supply chain network examples.