Competitive Supply Chain Research Articles

Game-theoretic analyses of strategic pricing decision problems in supply chains

We consider strategic pricing problems in which each firm chooses between a non-cooperative (individual pricing) strategy and a cooperative (price negotiation) strategy. We first analyze a monopoly supply chain involving a supplier and a retailer, and then investigate two competing supply chains each consisting of a supplier and a retailer. We find that an appropriate power allocation between the supplier and the retailer can make the two firms benefit from negotiating the wholesale and retail prices. When the supplier negotiates the wholesale price, the retailer’s cooperative strategy can always induce supply chain coordination in the monopoly setting, whereas the two supply chains in the duopoly setting can be possibly coordinated only when the retailers determine their retail prices individually. In both the monopoly and duopoly settings, the wholesale price negotiation is a necessary part of the communications between supply chain members. When the supply chain competition intensifies, all firms are more likely to determine their prices individually rather than to negotiate their prices.

Competition and cooperation in the sustainable food supply chain with a focus on social issues

Additives are added to raw materials and products with purposes such as reduction of costs, improvement of physical appearance and taste, and enhancement of shelf life. Overuse of additives causes health problems for consumers and hence supply chain members must consider social consequences besides the economic goals in the specification of the amount of additives. Furthermore, the production and delivery operations in the food supply chain constitute one of the leading causes of energy consumption and greenhouse gas (GHG) emissions. The reduction of GHG emissions increases cost, and a balance, therefore, needs to be established between economic and environmental goals. In this study, three pricing models are presented for a supply chain, including two suppliers and one manufacturer. Consumer health and the reduction of GHG emissions are investigated as the social and environmental objectives, respectively, besides the supply chain members’ profit. While a centralized structure is considered in the first model, the second and third models have decentralized structures. Unlike in the second model, where all the supply chain members compete with each other, an alliance is considered in the third model between the first supplier and the manufacturer, competing with the other supplier. The equilibrium decisions are derived for each scenario using the game-theoretic approach. Moreover, the impact of the supply chain structure on the carbon emissions, amount of additives, and agents’ profits are investigated. A number of interesting insights have been revealed from these analyses. For example, it is demonstrated that the government could set penalties for the addition of additives in specific ranges, as a result of which the supply chain members would prefer not to add to additives. A numerical analysis is carried out to present more insights into the effects of the main parameters. We found that the more customer demand depends on price, the less the manufacturer will be motivated to reduce GHG emissions. GHG emissions increase as government penalty for endangering consumer health rises. Alliances between supply chain members are economically beneficial when product demand is dependent more strictly on the reduction of GHG emissions.

Supply Chain Competition: A Market Game Approach

We study supply chains where multiple suppliers sell to multiple retailers through a wholesale market. In practice, we often observe that both suppliers and retailers tend to influence the wholesale market price that retailers pay to suppliers. However, existing models of supply chain competition do not capture retailers’ influence on the wholesale price (i.e., buyer power) and show that the wholesale price and the order quantity per retailer do not change with the number of retailers. To overcome this limitation, we develop a competition model based on the market game mechanism in which the wholesale price is determined based on both suppliers’ and retailers’ decisions. When taking into account retailers’ buyer power, we obtain the result that is consistent with the observed practice: As the number of retailers increases, each retailer’s buyer power decreases, and each retailer is willing to pay more for her order, so the wholesale price increases. In this case, supply chain expansion to include more retailers (or suppliers) turns out to be more beneficial in terms of supply chain efficiency than what the prior literature shows without considering buyer power. Finally, we analyze the integration of two local supply chains and show that although the profit of the integrated supply chain is greater than the sum of total profits of local supply chains, integration may reduce the total profit of firms in a retailer-oriented supply chain that has more retailers than suppliers. This paper was accepted by Charles Corbett, operations management.

An exploratory and quantitative assessment of the sustainable competitiveness of supply chain: Evidence from Indian sugar industry

The main aim of this paper is to examine the effect of prominent forces on the sustainable competitiveness of the Indian sugar supply chain with the role of government as a moderator. A survey involving managers working in Indian sugar companies was conducted and partial least square (PLS) method was used to test the proposed research model. The findings supported the positive relationshipbetween suppliers' power and competitiveness; suppliers and industry rivalry; buyers' power and industry rivalry; and government dynamics and competitiveness in the discussed industry. Furthermore, entry barriers exerted a hypothesized negative relationship with competitiveness. The government is working as a moderator between the suppliers' (sugarcane growers') power and the competitiveness of the discussed industry as hypothesized. This study discerns the foundational literature from extant research work; lays down basic underpinnings for contextual discussion on competitive forces in the discussed industry and adds empirical facet by surveying the industry professionals. These findings may draw the attention of incumbents, industry practitioners, academicians, and policy‐makers to the impact that selected environmental forces have on competitive landscape of the sugar industry.

From Competition to Conspiracy: Accessing the Federal Trade Commission’s Merger Policy in the Pharmaceutical Sector

Prescription drugs safeguard Americans from numerous life-threatening maladies. Competition in pharmaceutical R&D, and for generic entry, produces essential drugs and ensures that medications are accessible and affordable. That promise is fading. There is mounting evidence that connects high market concentration and high drug prices. Price gouging for important drugs, conspiracies to fix generic drug prices, and ever more innovative schemes by branded drug manufacturers to keep generic rivals out of the market put merger control at center stage.The AAI White Paper “From Competition to Conspiracy: Accessing the Federal Trade Commission’s Merger Policy in the Pharmaceutical Sector” examines a major root of this problem—the Federal Trade Commission’s (FTC’s) policy of settling virtually all challenged horizontal pharmaceutical mergers with consent orders requiring divestitures. This stands in contrast to agency decisions to seek injunctions to stop highly concentrative, harmful mergers—arguably the most effective remedy for fully restoring competition. AAI’s macro-analysis of pharmaceutical mergers challenged by the FTC between 1994-2020 (to date) reveals that many drug makers engaged in serial mergers and/or repeatedly went to the till to purchase divestiture assets in other challenged mergers. Many of these firms were subsequently acquired by other pharmaceutical manufacturers, sometimes shortly after purchasing divestiture assets.The effect of the FTC’s policy has been the swapping of assets within a relatively small group of large and increasingly powerful firms. Just under 20% of all unique branded and generic firms that engaged in repeated mergers and acquisitions (M&A) and/or purchases of divestiture assets account for almost 45% of pharmaceutical assets “changing hands” from 1994-2020. Many of the very firms that were the most active in M&A, and as purchasers of divestiture assets, appear as defendants in private, state, and federal non-merger antitrust litigations and in federal criminal indictments. These accumulating lawsuits serve as powerful evidence that something has gone awry with merger policy in the pharmaceutical sector, leading to the exercise of market power by dominant firms and oligopolies.The FTC’s role in managing the allocation and ownership of important pharmaceutical assets through its extraordinary approach toward merger control has unduly involved it in shaping the industry. This resembles a form of “industrial planning” rather than antitrust law enforcement, which is designed to deter future anticompetitive conduct and relies on market forces to determine market structures. The FTC’s policy has also deprived the antitrust community and public of important transparency. Because no challenged merger between 1994-2020 was litigated in federal court, there is no judicial record detailing how highly concentrative mergers were likely to have survived a presumption of illegality. There is thus no way to evaluate claims that pharmaceutical mergers were likely to have delivered lower prices through claimed cost savings or consumer benefits due to improved quality and innovation.This White Paper begins with background on drug pricing and competition in the pharmaceutical supply chain. It then turns to the drug mergers themselves and the asset divestitures required in FTC consent orders. Next is an assessment of private, state, and federal antitrust cases against the companies involved in M&A and as buyers of divestiture assets. It concludes with policy recommendations on reframing competition policy in the pharmaceutical sector. The FTC, which has devoted considerable resources and expertise to understanding the pharmaceutical sector, should take the lead in reforming its own policy on merger control.Competition problems in pharmaceuticals now rise to the level a public policy concern, addressable only through a coordinated policy response, of which stronger antitrust enforcement and legislative reform should be central components. The imperative for wholesale change in the FTC’s merger policy in the pharmaceutical sector is more pressing than ever. Only robust competition among drug makers will result in the availability and affordability of drugs more generally, but also essential drug therapies and vaccines relating to the COVID-19 pandemic.

Competition in dual-channel supply chains: The manufacturers' channel selection

Innovative selling channels have brought about opportunities as well as challenges for upstream manufacturers. The past few years have witnessed both the success and failure of manufacturers with different channel strategies. To explore the rationale of different channel strategies in various contexts, we develop a model to analyze a manufacturer's channel selection decision among three channel strategies, i.e., a direct-channel strategy, a retail-channel strategy, and a dual-channel strategy consisting of both direct and retail channels. The model rests on the channel differentiation in terms of consumers’ channel preferences and operating costs of retail and direct channels. Specifically, we incorporate the action of a competitor and track down its influence on the focal manufacturer's channel preference. Our research clarifies the role of competition in the market and offers insights into the competitive nature of business in real life. Results show that the manufacturer's channel preference depends not only on the channels’ operating costs and consumers’ channel preferences but also on the competitor's channel strategy. We find that symmetric manufacturers can adopt asymmetric strategies as Nash equilibria and also that there are situations where no Nash equilibrium exists. We characterize the Nash equilibria in the channel selection game based on the exogenous parameters of the model.

How the Lean Management Decision Influences the Transportation Cost in the Supply Chain?

The purchase decisions require information on where each phase in aretail supply chain should be placed. The presented method is an integrated tool for retail supply chain totransaction cost optimization. The model does not only present a company-level lean management’s decisions within a supply chain, but it also shows the exact method to optimize the supply chain competitiveness. The allocation model also illustrates how the purchase decisions are allocated for producer, distributor and retail companies. The complexity of the allocation model may be affected by the size of the logistic costs, the algorithm used to calculate the supply chain purchase decisions and the final needs of the customers. The lean management approach could be a redemption to a company, but the results do not help to enhance competitiveness for the whole supply chain in every case. In this paper, a model method is demonstrated that helps to gain benefit of the lowest cost of integrated inventory management decisions. One of the essential parts ofthis research is that not onlythe lean management’ result is considered, but effects of purchase decisions are integrated into the whole retail supply chain, as well. This type ofintegrated approachcan have an exponential impact on profitability on supply chain level effectiveness. In the paper are discussed issues that are important from the perspective of carriers, truck owners and operators, transportation policy makers and shippers. Different capacities of transportation and their costs and performance characteristics from lean aspect are discussed as well.

Digital integration to enhance market efficiency and inclusion of smallholder farmers: a proposed model for fresh fruit and vegetable supply chain

High-value agriculture in India is witnessing a transformation, specifically in fresh fruits and vegetables (FFV). Supply chain stakeholders, mainly small and marginal farmers, receive a very minimal share in consumer rupee due to market uncertainty, high post-harvest losses, information asymmetry, lack of processing facilities and the erratic demand-supply situation. The current study draws from an extensive review to propose a competitive, inclusive, sustainable and scalable supply chain model of primary processing centers connecting farmers directly and efficiently with consumers. The proposed model will connect producers with the rest of the supply chain and streamline the supply chain process to reduce post-harvest losses as much as possible. The integration of a market information system will ensure transparency to help in better decision-making, reduced intermediaries and information asymmetry for producers, as well as the systematic disposal of the produce. The model will increase the efficiency of the FFV supply chain and has practical implications for agribusiness management and policymakers in relation to FFV supply chain development in India.

Logistics service sharing and competition in a dual-channel e-commerce supply chain

Logistics service plays an increasingly important role in e-commerce business. Logistics service sharing (LSS) among e-commerce firms provides more consumers with better service experience, but gives rise to new competition problem. In this paper, we study the LSS and the resulting competition problem in a dual-channel e-commerce supply chain consisting of a manufacturer and a retailer. The manufacturer wholesales products to the retailer who then retails them to consumers, and the manufacturer simultaneously sells the same products to consumers directly. The retailer owns superior logistics service resource, which can be shared with the manufacturer. We model two cases: without LSS and with LSS. For each case, we model the competition problem in this supply chain as a Stackelberg game, where the retailer acts as the leader and the manufacturer acts as the follower. Optimal decisions and profits of each firm as well as consumer surplus and social welfare in each case are provided. We find that compared to the case without LSS, in the case with LSS, the manufacturer’s retail price always increases, but the retailer’s retail price may increase or decrease, depending on the price of the shared logistics service. The profit change of the two firms also depends on the price of the shared logistics service. It is found that the two firms can be Pareto improved by LSS if this price lies in a certain range, which shrinks when the competition intensity increases. The social welfare with LSS will be greater than that without LSS when the price of the shared logistics service is less than a threshold.

Retailers’ competition and cooperation in a closed-loop green supply chain under governmental intervention and cap-and-trade policy

This paper investigates retailers’ competition and cooperation in a closed-loop green supply chain consisting of one common manufacturer and two competing retailers under governmental intervention and cap-and-trade policy. Considering a consistent pricing strategy of the manufacturer, this study develops one centralized policy and three manufacturer-led decentralized policies viz. Collusion, Cournot (Nash), and Stackelberg depending on different competitive behaviors of the retailers. Optimal decisions are compared analytically through a special case where the retailers face the same basic market, and numerically where they face both the same basic market and different basic markets. A transfer payment mechanism is developed so that all the channel members achieve Pareto improvement. Numerical results indicate that (1) among the three decentralized scenarios, Nash behavior is profitable to the manufacturer, customers, and the whole supply chain, but Collusion behavior is profitable to the retailers only when the difference of their basic markets is small, (2) when the retailers face the same basic market and play Stackelberg game, it is beneficial for the retailers to be follower rather than leader, and (3) occurrence of both the government subsidy and cap-and-trade policy is profitable to all the channel members.

Effects of supply chain competition on firms’ product sustainability strategy

The competition between supply chains becomes increasingly popular with the development of economic globalization. Sustainable development is an important issue and attracts considerable attention from industrial and academic communities, especially under the competitive environment, because of the huge and rapid assumption of natural resources and global warming. In this study, we consider a setting with two competitive supply chains, and each chain is consisted of an upstream firm and a downstream firm. The two downstream firms compete with each other only at the product sustainability level. Using a theoretical game model, we explore how supply chain competition affects firms’ strategy on product sustainability and profits by considering four cases in which the supply chains can be integrated either vertically or horizontally. Results show that the existence of horizontal competition, vertical competition, and competition between sustainable products play important roles in determining firms’ decisions. In particular, the existence of horizontal competition can stimulate firms to increase the level of product sustainability and improve the supply chain system’s profit under some conditions. However, the presence of vertical competition will stop firms from improving the product sustainability level but increase the performance of supply chain system under certain conditions. Depending on the degree of competition between sustainable products, the supply chain can strategically decide whether or not to integrate the system either vertically or horizontally.

Interactions of traceability and reliability optimization in a competitive supply chain with product recall

Traceability which is a tracking capability used to identify the sources of many quality problems, such as product recalls, has become an important feature of supply chains. In this paper, we develop a game-theoretical model to study the interactions of supply chain traceability and product reliability optimization in a competitive supply chain with product recall. Specifically, we consider two competing manufacturers that may choose to invest in traceability on the basis of product reliability optimization, by using the Non-track, Mono-track, and Duo-track models, and then sell products through two competing retailers to customers who are concerned with the differentiation of the product, the channel, and the traceability. We derive the optimal traceability and product reliability strategies under the three tracking models with endogenous pricing, and demonstrate the equilibrium tracking strategies for two competing manufacturers. The results show that traceability can fully substitute product reliability when the traceability investment cost coefficient is low but it may improve product reliability when the cost coefficient is high and the reliability investment cost coefficient is low. Investing in traceability will always benefit the manufacturer itself, and may benefit the competitor who does not track when the traceability investment cost coefficient is large enough. Interestingly, we find that the profit of the manufacturer who invests in traceability is increasing in the traceability competition intensity.

Barriers to multi-tier supply chain risk management

PurposeMulti-tier supply chain risk management (MSCRM) is an evolving and dynamic field, as any defaults or glitches in supply chains can potentially harm the efficiency and competitiveness of the entire supply chain. This study aims to investigate barriers to MSCRM in the automotive and civil aircraft industries.Design/methodology/approachThis study adopts an inductive case study research design. The case analysis includes two parts. First, the within-case analysis develops case profiles and identifies critical categories. Second, the cross-case analysis compares MSCRM patterns across the cases.FindingsThis study argues that narrow information sharing and communication covering only the immediate supply chain partners obstruct the efficiency of MSCRM. Similarly, high dependency on strategic alliances with suppliers hinders efficient MSCRM. Additionally, relying on information and communication technologies (ICT) increases companies' exposure to risks and poses another barrier to efficient MSCRM.Research limitations/implicationsFurther research should be pursued to expand generalizability and test the validity of the findings using other forms of data collection and methodologies, such as large-scale surveys, experiments or secondary data across different sectors and typical supply networks.Practical implicationsThis study provides empirical evidence on the obstacles faced by companies during the process of MSCRM. These findings can guide practitioners in developing initiatives to overcome these challenges.Originality/valueThis study is among the first to investigate the barriers to MSCRM in the automotive and civil aircraft industries using in-depth case studies across three tiers of the supply chain.

Supply chain management in hospitality and its impact on competitive advantage, hotel, and supply chain performance

In this study, the relationship between supply chain management functions, supply chain performance, competitive advantage, and organizational performance in the hospitality were investigated. The objective of this study was to assess the performance of supply chains and management in the hospitality. For this purpose, a model consisting of 4 variables and 5 hypotheses was created. The statistical population of this study included all administrative staff of the 4 and 5-star hotels in Tehran. Sampling among senior and middle managers was done randomly. A total of 199 samples were collected and the designed model was tested using a structural equation approach. All study hypotheses were approved. The results indicated that using the dimensions of the supply chain management function, we can observe the positive and comprehensive impact of these factors on organizational performance, supply chain performance, and competitive advantage. In addition, supply chain performance and competitive advantage were found to have a positive and significant effect on organizational performance.

Coordination contract for a competitive pharmaceutical supply chain considering corporate social responsibility and pricing decisions

Corporate social responsibility (CSR) and pricing decisions are proposed for a competitive two-level pharmaceutical supply chain (PSC) comprising two pharma-manufacturers and one pharma-retailer. In the investigated PSC, the pharma-manufacturers competitively invest in the CSR effort to produce a new medicine and sell two substitutable products to the market through the pharma-retailer, deciding on selling prices of manufacturers’ products. The PSC under consideration is modeled in three decision-making structures, i.e., decentralized, centralized, and coordinated models. In the decentralized model, the pricing and CSR decisions are individually obtained using a pharma-manufacturers–Stackelberg game structure. In the centralized model as a benchmark, the best performance of the entire PSC system is achieved. Finally, to encourage all PSC members to agree on the coordination plan, a CSR cost-sharing contract is proposed. Our results reveal that under competitive environment, the proposed CSR cost-sharing contract is able to increase market demand by significantly decreasing selling prices and increasing level of the CSR efforts.

Competitive Advantage with Vendor Managed Inventory

Vendor managed inventory (VMI) has become a competitive supply chain management tool that has been used by retailers, suppliers and manufacturers to reduce inventory management cost over the last few decades. The basic concept of VMI is that suppliers (vendors) are accountable for a customer’s inventory restocking when supply is low. Minimum inventory levels, consignment stocks, and vendor ordering are three of the key terms associated with this model that is designed to work on the order fulfillment processes of a company. As with every business model, there are several advantages and disadvantages of VMI for both the buyer and the supplier that should be considered before deciding to implement. We discuss critical issues concerning vendor managed inventory and examine the impact of VMI on the organization and its supply chain network.

Virgin or recycled? Optimal pricing of 3D printing platform and material suppliers in a closed-loop competitive circular supply chain

Three-dimensional printing (3DP) or additive manufacturing is regarded as an environmentally friendly and sustainable form of manufacturing, which allows circular manufacturing as the 3D printed waste and products can be recycled for further 3DP operations. Due to the fact that the reclaimed material is commonly perceived to have poorer quality than the virgin material, the pricing of materials and printed products are crucial for consumers to decide their printing and material selection decisions. We consider a closed-loop competitive circular supply chain comprising (1) a 3DP platform that provides 3DP services to print products from virgin and recycled materials, (2) material suppliers that provide virgin and recycled materials (filaments) for the platform, and (3) end users who use the platform to print their products. We derive the prices, demands, and profits of the 3DP platform and material suppliers in Stackelberg equilibrium. We also conduct numerical studies using real-life data to generate practical insights from the analytical findings. Most interestingly, we find that while the platform prefers, both types of suppliers avoid, printing high-quality products from recycled material. We derive management insights and policy implications from the analytical and numerical findings for the closed-loop competitive circular supply chain.

Economic and employment impacts of offshore wind for Ireland: A value chain analysis

ABSTRACT The imminent development of a number of offshore wind farms in the Republic of Ireland presents a sizable opportunity to stimulate the Irish economy through the growth of an indigenous and globally competitive offshore wind supply chain. This study uses a value chain analysis to evaluate the economic and employment potential of the offshore wind sector for Ireland. The analysis is based on the expenditure on products and services required to develop an offshore wind farm, the planned capacity of projects in the pipeline, and the ability of Irish companies to supply the sector. Results suggest that by 2030, 2.5–4.5GW of domestic offshore wind development could create between 11,424 and 20,563 supply chain jobs and generate between €763 m and €1.4bn in gross value added. This is the first study to estimate domestic GVA potential for the sector.

Market competition and pricing strategies in retail supply chains

This study provides a better explanation for the continued prevalence of high–low (Hi–Lo) pricing strategy. We investigate the impact of market competition on adopting two different pricing strategies in the retail industry: everyday low price (EDLP) strategy and Hi–Lo strategy. We developed two analytic models using a game‐theoretic modeling approach: the profit maximization model and the sales revenue maximization model. We then conducted an econometric analysis based on retail store‐level dataset. The result shows that an EDLP player's equilibrium price depends highly on the cost level rather than competitor's price whereas the Hi–Lo player's equilibrium price depends mainly on the range of promotional basket as well as the cost level.

Competition among supply chains: the choice of financing strategy

This article aims at studying the incentive for factoring in competing supply chains to examine the influences of the factoring decision in one supply chain on other chains. We consider multiple competing supply chains, each consisting of a manufacturer and a retailer. We firstly examine the issue under the special case of two supply chains, and then extend the model to multiple supply chains. The extended model is actually a bi-level non-cooperative game with multiple leaders and multiple followers, which we formulate as an Equilibrium Problem with Equilibrium Constraints. Numerical examples are presented to illustrate the rationality of the proposed model for the supply chains competition with financing choices.