Multi-agent simulation of collaborative strategies in a supply chain

The bullwhip effect is the amplification of the order variability in a supply chain. This phenomenon causes important financial cost due to higher inventory levels and agility reduction. In this paper, we study, for each company in a supply chain, the individual incentive to collaborate to reduce this problem. To achieve this, we simulate a supply chain inspired by the Quebec forest industry, in which each company is an agent that uses one of three ordering schemes. Each ordering scheme represents a level of collaboration. One run of the simulation is done with fifty (50) weeks for each of the 3⁶ = 729 combinations of these 3 ordering schemes among the 6 companies of the simulation. In each run, we evaluate each company??s inventory holding and backorder costs. These outcomes are used to build a game in the normal form, which is next analyzed using Game Theory. In particular, we find two Nash equilibria incurring the minimum cost of the supply chain. We also note that there are no Nash equilibria in which some companies do not collaborate: collaborating companies have no incentive to stop collaboration.