Improving resilience via capacity allocation and strategic pricing: Co-opetition in a shipping supply chain

Abstract

The shipping industry has witnessed fiercer competition and more volatility. As a new source to increase profits, more and more liner companies are beginning to encroach on the downstream market, forming a co-opetition relationship between liner companies and freight forwarders. Insufficient (globally or regionally) capacity is also becoming a common problem to liner companies. This paper uses a game-theoretical model to study how can resilience be improved through capacity allocation and pricing in a shipping supply chain with insufficient capacity. We solve the model analytically and find that: The establishment of a direct selling platform (encroachment) helps the liner company to expand his competitive advantages, the price and profit of the liner company are higher than the counterparts of the freight forwarder. Moreover, with the spot market, deliberate capacity allocation and pricing strategy can help to enhance supply chain resilience in case of capacity shortage.