The Vertical Structure And Cooperative Contract Under Competing Supply Chains

With the development of economic globalization and increasingly fierce market competition, enterprises have been unable to develop in the complex and volatile environment by their own strength. More and more companies begin to seek alliance and cooperation with their upstream(or downstream) members. The competition between enterprises is replaced by the competition between supply chains. The research on the vertical structure and the vertical cooperation contract under supply chain competition not only plays an important role in the development of supply chain theory, but also has important practical significance for enterprise’s supply chain management.In this paper, we consider that two manufacturers and two retailers compose the exclusive supply chain or cross supply chain. We discuss how the innovation oriented enterprises and remanufacturing enterprises design vertical structure under the exclusive supply chain. We analysis that how enterprises cooperate with their members under the cross supply chain. We identify the effect of different vertical structure and different cooperation contract on profits of supply chain members.First, this paper investigates the problem of innovation choice game in competing supply chain, each consisting of one manufacturer and one retailer. Then, we investigate vertical integration of two competing supply chains, each consisting of a manufacturer, a supplier, and a retailer. Each manufacturer has one of the three strategies: no vertical integration, forward integration, or backward integration. The analysis indicates that for two tires supply chain, when the intensity of competition and spillover effect are under a certain value, the equilibrium choice of the manufacturers would shift from traditional technology to innovation technology. When the intensity of competition and spillover effect exceed a certain value, the equilibrium choice of the manufacturers would shift from innovation technology to traditional technology. For three tiers supply chain, when the intensity of competition is not strong, if innovation investment cost coefficient is low, backward integration strategy is the dominant equilibrium; if the innovation investment cost coefficient is high, forward integration strategy is the dominant equilibrium; when the two chain competition and innovation investment cost coefficient are both very high, diversification strategy as the dominant equilibrium at last.Second, we investigate reverse channel choice under a close-loop supply chain system consisting of two manufactures selling substitutable products to two exclusive retailers. The models under a centralized structure provide a benchmark scenario to compare the ones under decentralized structure with respect to the reverse channel choices of the members in two supply chains. We study how the manufacturer and the retailer make their price decision including the wholesale price, retail price, return rate, and how to choose the marketing channel for the case of product remanufacturing. We find that if the buy-back price is low and the intensity of competition is not sufficiently high, manufacturers and retailers have a win-win by manufacturers collecting model. If the buy-back price is high and the competitive intensity of products is in the moderate range, manufacturers and retailers both have an improvement under collection structure of retailers. The choice of marketing channel for manufacturers and supply chain depend on the competitive intensity of products and the saving cost in remanufacturing.Next, we consider a cross supply chain model of two manufacturers and two retailers, and investigate the impact of the platform-sale on the profit of the supply chain members, and identify the dynamic evolution of the contract selection. We analyze the conditions of the manufacturers and retailers’ profit improvement, the game equilibrium characteristics and limitations of contracts. The results indicate that when one retailer uses the traditional distribution structure, the other retailer’s channel choice depends on the intensity of competition between the products and the intensity of competition between retailers. This is significantly different from that when competitors use the platform-sale the retailer’s channel choice is not dependent on any factor. What’s more the intensity of competition between the products is the important factor and the intensity of the competition between retailers is only the catalyst for contract choice.At last, we study the problem of contract choice under the cross supply chain with uncertain demand. Retailers face uncertain demands, and demand forecasts are private information to them. Manufacturers, as Stackelberg leaders, can decide whether or not to acquire such private information from retailers through contracts. We obtain the subgame perfect Bayesian-Nash equilibrium for contract choice. We find that the two-part tariff contract is a dominant choice under certain conditions. Specifically, with negotiation of the lump sum payment, all supply chain members can benefit from a two-part tariff contract under certain conditions.