Analysis of leadership structures for two-echelon supply chains involving multiple risky suppliers

Abstract

We address a game theoretical analysis of the leadership structure of two-echelon supply chains with a single supplier and a single retailer involving a risky supplier under demand uncertainty. The risky supplier has a risk of unavailability of delivering the product to the retailer. The equilibrium solutions for different leadership structures are analytically derived. The influence of the probability of risky supplier availability on the optimal leadership structure is investigated. The model is extended to consider a two-echelon supply chain with two risky suppliers. The total profits for each leadership structure are evaluated from the perspective of the entire supply chain. The analytical results show that the leadership structure with the risky supplier as a leader can maximize the total profit. Numerical examples are provided to show the validity of the proposed analysis.