Modelling inter-supply chain competition with resource limitation and demand disruption

Abstract

This paper proposes a comprehensive model for studying supply chain versus supply chain competition with resource limitation and demand disruption. We assume that there are supply chains with heterogeneous supply network structures that compete at multiple demand markets. Each supply chain is comprised of internal and external firms. The internal firms are coordinated in production and distribution and share some common but limited resources within the supply chain, whereas the external firms are independent and do not share the internal resources. The supply chain managers strive to develop optimal strategies in terms of production level and resource allocation in maximising their profit while facing competition at the end market. The Cournot–Nash equilibrium of this inter-supply chain competition is formulated as a variational inequality problem. We further study the case when there is demand disruption in the plan-execution phase. In such a case, the managers need to revise their planned strategy in order to maximise their profit with the new demand under disruption and minimise the cost of change. We present a bi-criteria decision-making model for supply chain managers and develop the optimal conditions in equilibrium, which again can be formulated by another variational inequality problem. Numerical examples are presented for illustrative purpose.

Keywords:

• supply chain versus supply chain competition
• internal and external firms
• resource allocation
• demand disruption
• variational inequality

Acknowledgements

We would like to thank the anonymous referees and the editor for their many helpful suggestions and insightful comments, which have significantly improved the content and presentation of this paper. The third author acknowledges the two Chinese institutions for hosting his sabbatical visit. He was appointed as a Zi Jin scholar chair professor at Nanjing University of Science and Technology and as a Zi Qiang scholar chair professor at Shanghai University in China during the course when this work was completed.

Additional information

Funding

This research was supported in part by the National Natural Science Foundation of China [grant number 71171069], [grant number 70871031]; the Humanities and Social Sciences Foundation of Heilongjiang Province [grant number 12522052]; the Doctoral Foundation of Taiyuan University of Science and Technology [grant number W20122001].

Notes on contributors

Zhaobo Chen

Zhaobo Chen received the MSc and PhD degrees from School of Management in Harbin University of Science and Technology, Harbin, China, in 2009 and 2011, respectively. He is currently a tutor of MS at the College of Economy and Management, Taiyuan University of Science and Technology, Taiyuan, China. His research interests include applied optimisation and applications in supply chain management and other managerial areas.

Chunxian Teng

Chunxian Teng received the master's degree in system engineering optimisation from the Harbin Institute of Technology, Harbin, China, in 1987. He has been a professor and a tutor of PhD at the Harbin University of Science and Technology, Harbin, China, since 2003. His research interests include supply chain management and optimisation theory.

Ding Zhang

Ding Zhang is a professor of management science and director of the MBA programme in the School of Business at the State University of New York at Oswego. He received BS in mathematics from the University of Science and Technology of China, an MS in operations research from Tsinghua University, in Beijing, China, and a PhD in industrial engineering from the University of Massachusetts Amherst. He was an assistant professor at Shanghai Jiao Tong University (China), a research associate at the University of Massachusetts Amherst, and a research fellow at the Hong Kong Polytechnic University. His research interests include: transportation science, supply chain management, spatial economics, and other competitive network problems.

Jiayi Sun

Jiayi Sun received the master's degree in basic mathematics from the Harbin University of Science and Technology, Harbin, China, in 2010, where she is currently pursuing the PhD degree in management science and engineering. Her research interests include closed-loop supply chain management and optimisation theory.