Supply chain models for complementary products under computational game theoretic optimization

Abstract

This proposed research consists of the recent development of complementary products in a supply chain model. A supply chain is basically a flow of products from manufacturer to send customers with money flow from end customers to manufacturer. It is possible that there are several suppliers, who make unfinished products and manufacturers finally assemble those unfinished products to final products and sends them to retailers through some distribution channels. The aim is not to show how many channels or stages in the supply chain model, but the aim is to obtain the global maximum profit for the whole supply chain with the bundling policy for complementary products. This proposed research investigates all possible combination of cooperative and non-cooperative supply chain with bundling policy for complementary products. The research consists of two manufacturers and one single retailer. The aim of this research is to incorporate the reservation price for complementary products in the supply chain management. To do so, the proposed study just uses a basic two-echelon supply chain for a single type of bundle products which consists of two different but complementary products. As this research considers two different products, thus two manufacturers are considered to produce two products. The bundle products may be considered with more than two products and then it is very reasonable to consider more than two manufacturers. This research only considers incorporation of reservation price for complementary products in the supply chain management with two manufacturers and one retailer. Thus, more than two manufacturers and other all possible combinations are not considered in this research and those ideas are considered for future research. The manufacturers make two different types of products, which are complementary to each other. They sell these products to the common retailer and the retailer makes them bundle and sells to the market with selling-price dependent demand and stochastic reservation price. Even though only three players are involved there and they are in commitment of supply chain, but they may think their own profit first than the supply chain profit. All models are solved with Stackelberg game policy as it contains unequal power of players, having leader-follower relationship. The models are solved analytically to obtain the global maximum profit for each case. All models are validated through numerical experiments. Using the data from literature, the research obtains more profit than exiting literature. In general, cooperative supply chain is more beneficial than the non-cooperative supply chain, which is also proved for this proposed research study, but result shows that non-cooperative supply chain gives more profit than the cooperative supply chain for some special cases, which directly relates with selling-price of single product or bundle product.