Analysis of Competitiveness in Agri-Supply Chain Logistics Outsourcing: A B2B Contractual Framework

Abstract

COVID-19 has left some permanent effects on the Regional Agri-Supply Chain (RASC). It has single-handedly accelerated the RASC’s performance through the globalization of local products and increased e-agri-business, virtual retailing trends, and smart logistics and warehousing services. The post-COVID worldwide growing demand for regional agri-products has increased the competitiveness in logistics outsourcing. Motivated by these changing notions, this paper addresses two major questions—whether the competitiveness in logistics outsourcing allows the supply chain drivers (supplier, retailer, and 3PL) to form a sustainable B2B pricing supply chain model, and what will be 3PL firms’ strategic decisions to secure sustainable profit under this competitiveness? In the light of competitive literature, this paper proposes two decision-making approaches, optimistic and pessimistic, models them using the Stackelberg game theory, and solves them using the subgame perfect Nash equilibrium. The result shows that, even after competitiveness in logistics outsourcing, the supply chain drivers agree to form a contractual supply chain. However, the competitive strategy-making of 3PL firms is a little tricky. Each focal 3PL firm must have perfect information about the peer firm’s strategic movement to choose its preferable strategy. Further, they can preferably constrain their core competencies (service price and quality level) to assure a sustainable profit.