The Contract Transformation: A Framework for Network Supply Chain Analysis and Design

du We propose a framework under which we can analyze large decentralized supply chain net- works. Such networks may procure from a variety of sources. We will model that part of the network that involved specific contracts between two members of the supply chain, and leave out of the network the procurement activities for any item that has a market. Thus, a critical aspect of these supply chains is that each member relates to other members in the form of contracts. These contracts form a basis for the relationship, and can range from simple, arms-length whole- sale price contracts (which we consider), to complex, quasi-vertical-integration relationships. Our objective is to analyze the behavior of such chains. We take an industrial organization (IO) perspective on large-scale supply networks. Most of the existing models in the field of sup- ply chain (and the related field of channel coordination) have considered two-tier supply chains, and our work extends the analysis of supply chains to larger structures. Specifically, our work is a generalization of the von Stackelberg formulation in Spengler (1950) to model acyclic supply networks where any member of the chain can be the overall Stackelberg leader.