Agility in a competitive supply chain with considering strategic customers

Growths of technology and innovation have made continual changes in fashion business and costumer tastes. In situations like that, retailers and manufacturers select agility and flexibility as their main supply chain strategies. In this study, a bi-level model including the retailer and manufacturer who traditionally compete on the product quantity and price is proposed; then another model is developed by adding some characteristics of agility to first model. In the proposed model, in addition to the competition between the supply chain members, influences of the customers’ behavior on the decisions of supply chain members are considered. This study is aimed at proposing efficient solutions for determining the price and quantity of ordering and production, considering the situations of competition, customers and market toward maximization of the manufacturers’ and retailers’ profit. The proposed bi-level model is converted to a single-level one using the Karush-Kuhn-Tucker (KKT) and the results of the model are investigated and discussed by employing in a numerical example. Results show that the retailer and manufacturer, by making proper and precise decisions, can increase their sale price. Further, by improving their decisions, they can reduce the product clearance sale at the end of the sales season, which ends in the growth of profit for both of the supply chain members.