Module-based service provision under different power structures

Abstract

Modular production requires new service provision under the trend of servitization. This paper is to explore the issue of module-based service associated with three different power structurers in a two-echelon supply chain that consists of a module supplier and a manufacturer. The manufacturer considers to delegate its upstream module supplier to provide services for downstream consumers. We divide the market into two types: the price-sensitive market and the service-level sensitive market. Different power structures and market types have a great impact on the service levels, prices and the profitability of each member in the supply chain. When the manufacturer (the supplier) acts as the leader in the supply chain, the module supplier should provide the highest (lowest)-level service and the manufacturer will charge the highest (lowest) price for the bundled product and service. The module supplier can benefit from the service-delegation relationship while the manufacturer will be hurt. There is an opportunity for the module supplier to offer the service, especially when the module supplier is in a dominated position.