A supply chain consists of independent entities with individual costs (profits).
Each separate supply chain entity has its own objectives which often have conflict
with objectives of other entities. Therefore, multiple decision makers are involved
in operation and control of the whole supply chain. Such a multi-level decision
network structure can be mathematically illustrated by using ‘‘multi-level
programming’’ principles.This aspect of supply chain is observable in real
situations in which it is often considered that the decisions are made sequentially
through a hierarchal structure. First, the upper level‘s entities maximize their own
net profit function and determine their own variables. After that the second level’s
entities do the same based on the previous level’s decisions. This procedure
continuesto the last level. The upper level‘s entities play the role of a leader and
the second level‘s entities play the role of a follower. Simultaneously, the second
level‘s entities play the role of a leader for the next level‘s entities. This
interrelated structure proceeds to other levels. Therefore, studying the decision
making process of production, inventory and pricing policy with mentioned
interrelated structure is beneficial to resolve the problems in firms.