Strategic design of competing centralized supply chain networks for markets with deterministic demands

Abstract

This paper develops an equilibrium model to design a centralized supply chain network operating in markets under deterministic price-depended demands and with a rival chain present. The two chains provide competitive products, either identical or highly substitutable, for some participating retailer markets. We model the optimizing behavior of these two chains, derive the equilibrium conditions, and establish the finite-dimensional variational inequality formulation, and solve it using a modified projection method. We provide properties of the equilibrium pattern in terms of the existence and uniqueness results. Our model also considers the impacts of the strategic facility location decisions on the tactical inventory and shipment decisions. Finally, we illustrate the model through a numerical example and discuss how the prices, costs, incomes, and profits behave with respect to key marketing activities, such as advertising, brand positioning, and brand loyalty.