This paper investigates the impact of competition and the strategic inventories on the performance of a supply chain comprising two competing suppliers and one retailer. Existing literature has shown that the retailer's optimal strategy in equilibrium is to carry inventories, and the suppliers are unable to prevent this. In contrast, our results show that the suppliers will prevent the retailer from carrying strategic inventories when the degree of competition between suppliers is high, and the retailer's carrying strategic inventory is not necessary to force suppliers to lower the future wholesale price. We also find the substitutable relationship between the effect of strategic inventories and the effect of competition. When the degree of competition increases, the suppliers are worse off but the retailer and the total supply chain are both better off when carrying strategic inventories. The retailer could introduce profit sharing contracts so as to encourage suppliers to support strategic inventories which enhance the entire performance of the supply chain.
Recent innovations in e-commerce have led to the emergence of online retailing platforms, where millions of products are sold. Most of these products are sold by third-party sellers who pay a fee for the e-retailer (called the platform owner). We investigate how the e-retailer manages the various products in the presence of consumer heterogeneity and diseconomies of scope. Our analytical results indicate that the e-retailer prefers the platform-selling mode when consumers have stronger heterogeneity or when the value of a product is high; moreover, the consumer heterogeneity benefits the e-retailer and hurts the supplier. We also analyze the effect of the relationship of among categories on the e-retailer’s choice. We show that the relationship among categories can invert the existing format. In addition, we find that the e-retailer may be better off and raise the number of products under strong diseconomies of scope when the categories are complements, and the opposite is true when the categories are substitutable.
This study focuses on the manufacturer's strategy of product innovation when a set of potential consumers are involved in product innovation through crowdsourcing. Two models are built for developing incremental and radical products to capture the manufacturer's optimal strategy in a supply chain which includes one supplier, one manufacturer, and some potential consumers. In addition, the effort compensation mechanism has been designed to improve the profits of the manufacturer and supplier, and consumer surplus. Finally, the innovativeness strategy is explored based on the manufacturer providing compensation for crowdsourcing consumers. The results show the following: (1) if the degree of preference dispersion is low, the percentage of crowdsourcing consumers is large, or the degree of knowledge spillover is high, the manufacturer prefers radical innovation. It also implies the negative relationship between the manufacturer's profit and innovation level. Otherwise, the manufacturer prefers incremental innovation, which implies the positive correlation between the manufacturer's profit and innovation level; (2) under the optimal product innovativeness strategy, supplier's profit and consumer surplus also are improved; (3) under certain conditions, offering compensation for crowdsourcing consumers is Pareto improvement strategy for the manufacturer, the supplier, and crowdsourcing consumers.
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