Sharing demand forecasts in a basic supply chain using game theory

Abstract

Supply chain can be defined as a set of distributed entities composed of manufacturers, suppliers, distributors, retailers and costumers. Supply chain management (SCM) is the supervision of its three flows: the finances flow, the materials flow and the information flow. Indeed, this paper focuses on the information flow, more precisely on sharing information within a one echelon supply chain. It examines a game theory approach applied on a basic supply chain composed of three entities called players: a retailer, a distributor and a supplier with probabilistic demand. Each player is rational: tries to maximize his profit, and consequently tries to find a local optimum; this situation leads to a loss of performance of the whole chain. The goal of our work is to optimize both inventory and transportation costs by using the concept of Game Theory.