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Mathematical Problems in Engineering
Volume 2011, Article ID 325610, 27 pages
http://dx.doi.org/10.1155/2011/325610
Research Article

Strategic and Tactical Design of Competing Decentralized Supply Chain Networks with Risk-Averse Participants for Markets with Uncertain Demand

Department of Industrial Engineering, Iran University of Science and Technology, 16846113114 Tehran, Iran

Received 23 April 2011; Revised 18 July 2011; Accepted 11 August 2011

Academic Editor: Alexander Pogromsky

Copyright © 2011 Ashkan Hafezalkotob et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

An integrated equilibrium model for tactical decisions in network design is developed. We consider a decentralized supply chain network operating in markets under uncertain demands when there is a rival decentralized chain. The primary assumption is that two chains provide partial substitutable products to the markets, and markets' demands are affected by tactical decisions such as price, service level, and advertising expenditure. Each chain consists of one risk-averse manufacturer and a set of risk-averse retailers. The strategic decisions are frequently taking precedence over tactical ones. Therefore, we first find equilibrium of tactical decisions for each possible scenario of supply chain network. Afterwards, we find optimal distribution network of the new supply chain by the scenario evaluation method. Numerical example, including sensitivity analysis will illustrate how the conservative behaviors of chains' members affect expected demand, profit, and utility of each distribution scenario.