Optimal Supply Chain Structural Choice under Horizontal Chain-to-Chain Competition

Abstract

This paper investigates the horizontal Nash game and structure selection strategy in two competing dominant enterprises. Each firm decides whether to outsource the retail or manufacture to the exclusive third-party enterprise and thus forms a decentralized supply chain structure. On the premise that third-party enterprises have no advantage on sales and manufacture cost, the revenue-sharing contract is introduced between the manufacturer and retailer, and the influence of decentralized structure on the game equilibrium structure and supply chain profit is analyzed based on Hotelling model. The results show that, when compared with centralized structure, decentralized supply chain has the structural advantage to improving not only its supply chain profits but also the competing chain. This interesting insight is counterintuitive to the common "double marginalization" effect and explains the outsourcing strategy from the perspective of supply chain competition. In addition, we find the dominant strategy in the evolutionary game is that both two chains are decentralized or integrated.

Decisions of Supply Chain Considering Chain-to-Chain Competition and Service Negative Spillover Effect

“…This result further verifies the findings of Table 3 and Corollary 3, indicating that in the chain-to-chain competition, the structural change of one supply chain from centralized to decentralized has a certain degree of "altruism", which is conducive to the improvement of the performance of the other supply chain. This finding verifies the conclusion of literature [5] in the competition between two power-equal supply chains. Together, the structural change of the supply chain from centralized to decentralized can always benefit the rival regardless of the power and status of the two competitive supply chains.…”

“…Lately, Wu et al examine structural choice in two power-balanced competing supply chains based on Hotelling model and find a "double marginalization" paradox. The results show that the supply chains under pure centralization and pure decentralization perform better, and the two structures are more stable [5].…”

“…Within the supply chain, for example, in vertical transactions between large manufacturers such as Apple, HP and small retailers, it is obvious that Apple and HP have more power or bargaining power compared with small retailers. Among the supply chains, for example, the coal supply chains of China Shenhua Energy, Datong Coal Mine Group and other large coal manufacturers are obviously stronger in horizontal bargaining than small coal enterprises [5,6].…”

Dynamic Outsourcing Development for Sustainable Competitive Advantage in a High-Tech Backend Semiconductor Equipment Firm

“…The typical study for outsourcing is to obtain the advantage of cost competitiveness by the cost-effective resource management which brings economic advantages for the outsourcing firms by the transaction cost analysis [4,5]. Some studies focused on the perspective of having competitive advantages by improving performance in cost and quality point of view, however, it was shifted to various aspects like social and environmental factors for sustainable outsourcing [6][7][8][9][10][11][12][13][14].…”

“…It is important to find and select critical factors for outsourcing development under a highly competitive situation [11]. Many other researchers studied competitive outsourcing [12][13][14].…”