Manufacturer Channel Encroachment and Evolution in E-Platform Supply Chain: An Agent-Based Model

Abstract

Manufacturer channel encroachment is a common phenomenon in the current e-commerce supply chain, which has been well studied. This study develops a multi-agent-based model of the e-platform supply chain to analyse manufacturers’ channel encroachment strategies and supply chain evolution. Through both direct sales channels and e-commerce platforms, manufacturers can sell two complementary products of varying quality. Consumers who have preferences compare the pricing information gathered from manufacturers through different channels before selecting the one that generates the best utility. At the end of each period, the manufacturers make a price adjustment using the genetic algorithm. We look at the supply chain evolution process through multi-period simulations and discuss the factors that influence encroachment decisions. We find that manufacturers’ channel encroachment is detrimental to the profitability of the e-commerce platform. Consumers’ channel preferences and quality preferences benefit the e-commerce platform and can discourage manufacturers’ encroachment decisions. In addition, increases in encroachment costs and commission rates can reduce manufacturers’ propensity for channel encroachment.