Decision Optimization of Four-Level Supply Chain with the Participation of Two-Echelon Logistics Service Providers under Different Power Structures

Abstract

Taking the four-level supply chain participated by two-echelon logistics service providers as the research object, this paper deeply studies the influence of different power structures on the optimal price and logistics service level decisions of the whole supply chain system. On this basis, this paper points out the optimal power structure of the whole supply chain system and then discusses the optimal cooperative decision-making mode to improve the operation efficiency of the supply chain system under optimal power structure. The results show that compared with the two power structures of manufacturer-led and logistics service integrator-led, the retailer-led structure is the optimal power structure, whether from the perspective of maximizing the total profit of the supply chain or the surplus of consumers. When the supply chain is facing consumers who are less sensitive to the retail price of products and more sensitive to the logistics service level, the advantages of retail-led decentralized supply chain are more significant. The centralized decision of product supply chain (PSC) and logistics service supply chain (LSSC) under different power structures is the dominant strategy, and the equilibrium strategy is Nash game adopted by both parties. At this time, the total profit of the supply chain system is the largest and the total social welfare is the largest, while the total profit and consumer surplus of the supply chain under LSSC-led structure are the smallest. When the supply chain is facing consumers with low sensitivity of logistics service level and product retail price, PSC and LSSC have more significant advantages in Nash game rather than Stackelberg game.

A Review of Logistics Pricing Research Based on Game Theory

“…Therefore, some scholars have constructed a supply-chain pricing model with cold chain LSPs as the leader [60,62,63]. In the logistics service supply chain (LSSC), LSIs are usually in the leading position, so scholars mostly use the Stackelberg game to study their pricing problem [37,39,[41][42][43]. Liu, Wang et al [37] discussed a two-stage LSSC pricing model with a surge in market demand in the second stage.…”

“…To meet the complex pricing scenarios, some scholars have used multiple game approaches instead of using a single game approach. Comparative analysis of logistics decision making under centralized or decentralized conditions is a hot topic, and there are many studies in this field [34,40,43,59,61,70]. In general, centralized decision making can achieve Pareto optimality, but its strict requirements on supply-chain participants make it difficult to achieve in practice.…”

“…In general, centralized decision making can achieve Pareto optimality, but its strict requirements on supply-chain participants make it difficult to achieve in practice. In the decentralized condition, some research has studied the influence of different power structures on the optimal price of the supply chain system in detail [43,70]. For example, Giri et al [70] studied the pricing and return decisions of a two-channel supply chain under centralized, decentralized (Nash game), and decentralized scenarios with vendor dominance, retailer dominance, and TPL dominance (Stackelberg game).…”

“…The results show that the pricing equilibrium under joint decision not only increases the profit of the system, but also contributes to an improvement in the service level. Part of the literature also investigates the pricing problem of a secondary logistics-service supply chain (LSSC) consisting of a logistics service integrator (LSI) and a functional logistics service provider (FLSP) [35][36][37][38][39][40][41][42][43][44]. These studies focus on the pricing and logistics capacity sourcing of LSIs and FLSPs within the LSSC.…”

“…These studies focus on the pricing and logistics capacity sourcing of LSIs and FLSPs within the LSSC. Differently, Zhang and Song [43] studied the pricing problem of a four-level supply chain (including manufacturers and retailers) with two-level LSSC participation. This is an interesting idea, but there is a lack of similar studies.…”