General Model of Supply Chain Competition: Description and Experimental Results

Abstract

Logistic chains can be characterized as dynamic systems, difficult to manage; where the decision problems lie in the quantity of inventory to maintain, the price strategy, and the level of responsiveness due to its strong impact on costs, service level, sales, and benefits. Several authors have studied these problems in stable stationary cases, analyzing a single isolated chain for purposes of optimization. However, generally the supply chains compete for a market share were the strategies addressed by each one of them influence in a coupled manner and, in turn, there is a feedback to the chain, through the perceived demand, which introduces variability and uncertainty. The objective of this paper is to present a dynamic simulation model of the competition of logistic chains characterized by a demand model that feeds back to the chains, taking into account the perceived level of service and understanding this as a function of the inventory. Nash equilibria are sought for the steady state with respect to the inventory and a control algorithm leads operators to the Nash equilibrium in a dynamic game of chain competition. The model is validated against a real case study.