Multitiered supply chain networks: multicriteria decision-making under uncertainty

In this paper, we present a supply chain network model with multiple tiers of decision-makers, consisting, respectively, of manufacturers, distributors, and retailers, who can compete within a tier but may cooperate between tiers. We consider multicriteria decision-making for both the manufacturers and the distributors whereas the retailers are subject to decision-making under uncertainty since the demands associated with the product are random. We derive the optimality conditions for the decision-makers, establish the equilibrium conditions, and derive the variational inequality formulation. We then utilize the variational inequality formulation to provide both qualitative properties of the equilibrium product shipment, service level, and price pattern and to propose a computational procedure, along with convergence results. This is the first supply chain network model to capture both multicriteria decision-making and decision-making under uncertainty in an integrated equilibrium framework.