Delivery Risk In A Supply Chain With A Dominating Member: Modeling The Effect Of The Inventory Policy

This paper simulates a three-member supply chain with delivery risk by a stochastic model based on the PrékopaZiermann model. The research aims to identify cases where the influencing power of a dominating supply chain member is needed to keep inventory at its optimum for the whole supply chain to maximize competitiveness. We set up a supply chain in which the production phases take place at locations geographically remote from each other. Thus, it is not only the timing of deliveries but also the duration of the distribution that needs to be managed as a random process. Introducing cost factors into the model allows us to get a more comprehensive picture of the profitability and apply our results for other economic and financial problems. We found that it is not only the behaviour of other chain members but also the level of margin provided that drives the inventory behaviour of the member firms. The overuse bargaining power of the dominating player to push down margins of other supply chain members might lead to increased risk and reduced competitiveness of the whole chain.