Non-cooperative two-echelon supply chains with a focus on social responsibility

• Main Authors: Hannan Amoozad Mahdiraji, Zenonas Turskis, Ahmad Jafarnejad, Ali Rezayar
• Format: Article
• Language: English
• Published: Vilnius Gediminas Technical University 2019-10-01
• Series: Technological and Economic Development of Economy
• Subjects: supply chain management; Nash equilibrium; Stackelberg game; corporate social responsibility
• Online Access: https://transport.vgtu.lt/index.php/TEDE/article/view/10719

To cooperate or not is one of the most challenging issues of supply chain management era. If the supply chain is managed optimally, the entire profitability increases. Meanwhile, corporate Social Responsibility (hereafter CSR) is defined as the social and ethical behavior of supply chain members against stakeholders such as shareholders, final customers, employees and executives. Moreover, the observance of the social responsibility obligations is of great importance for consumers and shareholders of companies. The decisions of the supply chain’s members play a direct role in determining the profits of each. These decisions are in conflict with other members in a competitive environment. In this paper, the contradictory variables encompasses the cost resulting from the performance of corporate social responsibility, inventory, shortage, advertising and pricing in a two-level supply chain, consisting a manufacturer and a retailer. After identifying the quantitative variables for measuring the social responsibility using Delphi-Fuzzy methods and Interpretive Structural Modeling, the most important and influential variable of measuring the social responsibility performance (forced labor ratio) has been selected. Subsequently, after modeling the profit function of each player, optimal results were emanated according to the bargaining power of each member and based on Nash and Stackelberg games. Afterwards, with numerical examples, the optimization and sensitivity analysis of social responsibility in each model has been discussed. The results indicate that the profit of manufacturer and retailer reduces by increasing the proportion of forced labor. Based upon Nash equilibrium, the manufacturer’s profit decreases with a slight slope; nonetheless, on retailer and manufacturer leadership models, the profit decreases with a slight increase of the forced labor.