Supply Chain Capacity Competition and Optimization Based on Online Transaction Advantage of Backwardness

Abstract

This paper is concerned with supply chain competition and capacity optimization under the assumptions that consumer demands in both online and offline markets are relative to each other. It focuses on “leader-follower” game model under supply chain framework of “one strong traditional manufacturer and one traditional retailer whose status is weakest, one online manufacturer is an uprising star, and the strong traditional manufacturer competes with the online manufacturer in online markets”. After that the paper analyses supply chain partners' optimal capacity decision and distribution by numerical analysis. Some conclusions could be found out as follows: Firstly, the appropriate offline market capacity can realize the strong traditional manufacturer's production cost minimize; Secondly, the retailer can avoid two manufacturers' capacity allocation excessive tilt to online market, however, this restriction capacity is limited, the retailer's competitive advantage has a upper limit; Thirdly, Industry capacity allocation proportion reaches the maximum somewhere, which suggests that the competitiveness of the up-rising online manufacturer gradually strengthen, and the increase of offline market capacity will go against the strong traditional manufacturer's maintain dominance of supply chain. Fourthly, the increasing of offline market capacity can improve consumer welfare, and the increasing of industry e-commerce development level will intensify three supply chain's competition; Finally, the excess capacity can be solved. The online manufacturer need pay much higher than the strong traditional manufacturer's online promotion effort to realize its revenue's significant improvement.