Strategic Inventory with an Unreliable Manufacturer across Multiple Supply Chain Structures

• Introducing a novel game theory model to explore the interaction between strategic inventory decisions and supply instability, advancing existing models by incorporating real-world complexities. • Analyzing the performance of the supply chain's profit under different supply chain structures. • Examining the effect of wholesale price-dependent holding cost on strategic inventory decisions under supply instability, offering a new perspective on cost management in uncertain environments. • Investigating the impact of price commitment on strategic inventory under supply instability. Supply stability has become increasingly crucial amid the reshaping of global supply chains. This paper introduces a novel analytical framework to examine the retailer's strategic inventory decisions and its effects on the manufacturer's and the supply chain's profits under three supply chain structures: complete decentralization, partial centralization, and complete centralization. Utilizing a game-theoretic approach, we derive equilibrium outcomes revealing that strategic inventory enhances the manufacturer's profit under complete decentralization. In contrast, this positive effect on the manufacturer's profit is not always observed under partial centralization. Our findings also indicate that the retailer's decision to adopt strategic inventory, along with the impact on the supply chain's profit, is contingent upon the supply stability level and unit inventory cost. We further analyze the performance of the supply chain under three structures and find that complete centralization always achieves optimal profit when the retailer does not choose strategic inventory. However, complete centralization does not always achieve optimal profit when the retailer opts for strategic inventory. These findings provide new insights into the role of strategic inventory under various supply chain structures.