Distribution network design of a decentralized supply chain with fuzzy committed distributors

Abstract

Abstract

We develop a distribution network model for a decentralized supply chain to investigate the optimal decisions of participants in an uncertain demand environment. The supply chain consists of one manufacturer and set of independent candidate distributors that distribute products to geographically dispersed markets in a competitive manner. All chain’s participants are assumed risk-sensitive. The stability of a distribution network depends on the fuzzy commitment of its distributors. The novelty of the paper lies in the manufacturer concerns about the preferences of the distributors to ensure stability of his distribution network. Hence, the manufacturer considers criteria of expected profit, variance of profit, and stability level to evaluate distribution alternatives. A decision-making methodology is presented for evaluation and selection the distribution network design alternatives. The tactical decisions in each distribution alternative are obtained from a Stackelberg game formulated as a bi-level distributed programming problem. We show that the methodology is able to capture a principal trade-off between the preferences of manufacturer and contractor distributors. Managerial insights are obtained through an illustrative example and its sensitivity analyses.