A supply chain planning model with supplier selection under uncertain demands and asymmetric information

In this paper, a supply chain planning model including a manufacturer, a retailer and multiple suppliers under demand uncertainty with asymmetric information is considered. The manufacturer determines production, estimated quantity of defective components and the selection of suppliers. Quantities and quality of components are decided by the selected suppliers. The negotiation between the manufacturer and the retailer is based on buyback contracts. Due to asymmetric information, the quality information of components purchased from suppliers is unknown for the manufacturer. Thus, two scenarios are investigated for the manufacturer to estimate uncertainty of risk. The problem is analysed by a Stackelberg game where the manufacturer is a leader and the suppliers are followers. An optimization approach is proposed to solve the problem under demand uncertainty. A Stackelberg equilibrium is obtained by the proposed solution approach. Computational experiments are conducted to illustrate the features of the proposed models with different parameters. The results show the validity of the proposed model.