Strategic and tactical design of competing decentralized supply chain networks with risk-averse participants for markets with uncertain demand

Abstract

An integrated equilibrium model for tactical decisions in network design is developed. We consider a decentralized supply chain network operating in markets under uncertain demands when there is a rival decentralized chain. The primary assumption is that two chains provide partial substitutable products to the markets, and markets' demands are affected by tactical decisions such as price, service level, and advertising expenditure. Each chain consists of one risk-averse manufacturer and a set of risk-averse retailers. The strategic decisions are frequently taking precedence over tactical ones. Therefore, we first find equilibrium of tactical decisions for each possible scenario of supply chain network. Afterwards, we find optimal distribution network of the new supply chain by the scenario evaluation method. Numerical example, including sensitivity analysis will illustrate how the conservative behaviors of chains' members affect expected demand, profit, and utility of each distribution scenario. Copyright © 2011 Ashkan Hafezalkotob et al.