Title: Supply Chain Competition between Two SCs and SC Coordination Modes for Shelf-Display-Quantity
Abstract: Advances in information technology enable effective coordination and information sharing between business partners in a supply chain(SC).Coordinating resource decisions across the supply chain can provide a competitive advantage that is difficult to duplicate.Supply chain competition is becoming instrumental to the success of global competition.Manufacturers compete with each other on the effective utilization of limited shelf space in a store.Retailers can potentially increase their sales volume by increasing the amount of goods displayed on the shelf space.Most manufacturers are willing to pay retailers to occupy the limited shelf space.Current literature lacks studies of supply chain competition in the area of shelf-display-quantity.This paper investigates supply chain competition by examining the relationship between shelf-display-quantity and retail price in three settings: two decentralized supply chains,two centralized supply chains,and one decentralized vs.one centralized supply chain.In this paper,we first use the EPEC(Equilibrium Problems with Equilibrium Constrains) model to characterize the competition of two decentralized supply chains.The upper layer is the competition equilibrium of two manufacturers and the lower layer is the competition equilibrium of two retailers.This finding shows that two retailers will take the cost-plus pricing strategy based on their operational cost(e.g.wholesale price).Second,a Nash equilibrium model is set up to characterize the competition of two centralized supply chains where the manufacturer and retailer in the same supply chain act as a whole to maximize the total profit of their supply chain.Third,the MPEC(Mathematical Programs with Equilibrium Constrains) model is set up to characterize the competition of one decentralized SC and one centralized SC,where the upper layer maximizes the profit of manufacturers in decentralized supply chains,and the lower layer is the competition equilibrium between the retailer in decentralized SC and centralized SC.Retailers in a decentralized SC will adopt the cost-plus pricing strategy based on their own cost.In contrast,retailers in a centralized SC will adopt the cost-plus pricing strategy based on SC cost.Research results shows that in the condition of SC vs.SC competition,a decentralized SC can't be coordinated by wholesale price.Subsequently,we analyze the problem of designing contracts to coordinate a supply chain.Two coordinative contracts,such as linear subsidy contracts and profit-sharing contracts are discussed thereafter.Supply chains can be converted from decentralized into centralized supply chains.Lastly,numerical examples are used to demonstrate the correctness of the proposed models and the validity of the coordinative contracts.Research results show that coordination is a dominant strategy for both supply chains.The profits of two SCs will be lower when these supply chains are coordinated than when they are not coordinated.This problem is a typical Prisoner's dilemma problem.Consumers are the main beneficiaries because SC coordination can improve the operational efficiency of supply chains.Consequently,retail prices can be lowered and shelf-display-quantity can be improved.Thus,consumer welfare can be largely increased.SC vs.SC competition and supply chain coordinating within one SC are important issues,which have received ever-growing interests from the academic and industry.This paper contributes to theoretical and practical understandings of SC issues.First,we set up three models to characterize two SCs' competition on shelf-display-quantity and pricing in three conditions.Second,we propose two contracts,such as a linear subsidy contract and a profit-sharing contract,to help improve coordination across supply chains under SC vs.SC competition.Finally,we analyze the efficiency of SC coordination and find that SC coordination is a dominant strategy.However,supply chain effectiveness can be much better improved in the coordination scenario than in the non-coordination scenario.There are some potentially interesting extensions such as multiple supply chains with multi-products.More research should be done on customer behaviors,commitment,and supply chain performance based on the service level of supply chain when considering SC vs.SC competition.
Publication Year: 2011
Publication Date: 2011-01-01
Language: en
Type: article
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Cited By Count: 3
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