Supply chain supernetworks with random demands

In this paper, we develop a supply chain network model in the form of a supernetwork, in which both physical and electronic transactions are allowed. The model consists of three tiers of decision-makers: the manufacturers, the distributors, and the retailers, with the demands associated with the retail outlets being random. We model the optimizing behavior of the various decision-makers, derive the equilibrium conditions, and establish the finite-dimensional variational inequality formulation. We provide qualitative properties of the equilibrium pattern in terms of existence and uniqueness results and also establish conditions under which the proposed computational procedure is guaranteed to converge. We illustrate the supernetwork model through several numerical examples for which the equilibrium prices and product shipments are computed. This is the first multitiered supply chain network equilibrium model with electronic commerce and with random demands for which modeling, qualitative analysis, and computational results have been obtained.

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