Coalition or Decentralization: A Game-Theoretic Analysis of a Three-Echelon Supply Chain Network

Abstract

Supply chains have become the major and dominant paradigm of business and competition. The main challenge is how to act in multi-echelon supply chains considering the levels involved. Making a choice independently or integrating with some or all levels will be a critical decision, and therefore affects the overall profit of the chain. This article proposes a non-cooperative game theory approach to helping in making a better decision in the supply chain and gaining the most accessible benefit. Our research considers unlimited three-echelon supply chains with S suppliers, M manufacturers and K retailers. The Nash equilibrium and definition are used bearing in mind inventory and pricing and marketing cost as decision variables for this matter. This paper studies a three-echelon supply chain network and focuses on the value of integrating a pair of partners in the chain. In the decentralized case, the supplier sets its own price, the manufacturer points out order quantity, wholesale price and backorder quantity, and the retailer charges the final retail price of the product and marketing product. Though there are multiple players at a single echelon level, each manufacturer supplies only a specific product to a given retailer. In addition to the decentralized case, two integration scenarios have been taken into account: manufacturer-retailer and supplier-manufacturer. As for manufacturer-retailer integration, inventory/holding cost issues diminish to a single warehouse and the retailer does not have to enforce marketing effort any more. Supplier-manufacturer integration brings similar benefits. Under each scenario, all parties involved simultaneously set their strategies. Through a numerical experiment, 17 design cases (through designing experiments) have been developed and the total profit of the supply chain under each scenario has been evaluated. Statistical tests on the above introduced 17 experiments have found that the decentralized system performs significantly worse than the integration of the supplier with the manufacturer, whereas no significant difference can be observed regarding other combinations.

Modeling of environmental aspects related to reverse osmosis desalination supply chain

“…Depending on the site-specific conditions, discharge costs to the seafloor for dilution at sea are significant, typically accounting for 10 to 30 % of the total investment costs of the desalination plants (26). Previously many researches focused on supply chain management coordination and optimization challenges in different industries and circumstances (27)(28)(29)(30). Even some scholars considered environmental and social issues in their studies (31)(32)(33).…”

“…plus transmission line. Total investment, operating and environmental costs (salinity reduction) without CO 2 control in US$/m 3 per cubic meter of freshwater is as Eq(29). plus transmission line.…”

A Hybrid Fuzzy BWM-COPRAS Method for Analyzing Key Factors of Sustainable Architecture

“…The COPRAS method was introduced by Zavadskas et al [53]. The reliability and accuracy of the COPRAS method is acknowledged by several scholars and, nowadays, it is used to solve different engineering and management multi-attribute problems [54][55][56][57][58].…”

“…In 2016 Beheshti et al performed the COPRAS method for strategy portfolio optimization [53]. Pitchipoo et al applied the COPRAS method in order to optimize blind spots in heavy vehicles [61].…”

The impact of knowledge management’s practices on supply chain performance of the dairy sector in Central Punjab: a mediating role of decentralization

“…When the individuals from the chain are not prepared to work together with respect to data sharing, the whole supply chain can indicate indulgent inefficiencies, for instance, the bullwhip impact. Statistical tests have found that the decentralised system performs significantly worse than the integration of the supplier with the manufacturer (Mahdiraji, Govindan, Zavadskas, & Razavi Hajiagha, 2014). A decentralised mechanism allows every player in a supply chain to make decisions independently at the right time, which ultimately results in better SCP.…”