Impact Of Power Structure On Supply Chain Performance Under Uncertain Demand

In the traditional supply chain, suppliers often plays a crucial impact on othermembers of the supply chain, dominates the supply chain through pricing, brand strategy,inventory turnover and other means. With the rapid advances in the economic life andcontinuous development of information technology, retailers which dominate the supplychain, such as Wal-Mart, Best Buy, Carrefour, rise rapidly. Manufacturers and retailers inthe transaction status of the conversion is taking place, the power structure in the supplychain changes accordingly. How the supply chain performances in the new power structureis the focus of this article. Based on the theoretical framework of game theory, we establisha power structure supply chain model in the face of uncertain demand to investigate howthe different power structures (dominant retailers, dominant manufacturers or the balance ofpower) in an uncertain demand (Additive shock and multiplicative shock) influence themembers of the supply chain (manufacturers, retailers) profits, as well as the overallefficiency of the supply chain. By analyzing the supply chain model under this framework,comparing equilibrium outcomes under different power structures, we prove that a company,or a member of the supply chain, often benefit from his dominant position, that is, thesupply chain members get more profits at higher dominance, while the manufacturer’sprofit in the additive shock and constant elasticity demand will be reduced due to thedominant position. At the same time, a balanced power structure is often beneficial for theoverall effectiveness of the supply chain, but also in the additive shock and constantelasticity demand this conclusion is not obvious. Additionally, we find that the retail pricecan play a pivotal role in determining supply chain efficiency. Specifically, the lower theretail price, the higher the overall efficiency of the supply chain. By contras the servicelevel which plays an important role in the traditional supply chain theory do not form asignificant impact on supply chain performance.