Research On The Coordination Strategy Of E-commerce Logistics System With Channel End-notes Involved

Effective and efficient logistics operations crucially influence the success of firms in newly emerged e-commerce market. Recently some Chinese e-commerce companies have begun to work with retail channels like convenience stores, which owned numerous networks of branches that located closely to consumer communities, trying to improve their performance on commodity distribution.In this collaboration model, those stores provide broadly covered end-nodes for consumers to pick up items they purchased after third party logistics finishing main transportation process, which helps to lower distribution cost, improve logistics performance and strengthen customer loyalty in aspect of convenience and safety. Meanwhile, retaliate channels expand their sources of income as well.However, the cooperation between e-commerce companies, third party logistics and convenience stores shows some vulnerabilities. Like "double marginalization" phenomenon in the field of supply chain management, decentralized decision-making model, under which individuals maximize their own benefits, always leads to conflicts among members with different targets and even to losses of total system interests. Thus the necessity of developing a collaboration model and a coordination mechanism within the three members is highlighted。Traditionally, researchers focused on coordination of decision-making along supply chains, especially between manufacturers and retailers, and gained mature achievements about various mechanisms to coordinate price and non-price behaviors, while few papers directly discussed about coordination approaches based on logistics outsourcing relationships. Also discussions related to e-commerce logistics tended to be qualitative, lacking of quantitative analyses about how e-commerce companies could effectively cooperate with their partners. This study aims to inquire into logistics collaboration strategy in the context of e-commerce mentioned above and to figure out valid contract coordination mechanisms from the perspective of e-commerce firms.Two operation scenarios are considered respectively in a risk-neutral e-commerce market, where consumer demands are determined by retail price and logistics device level. In the first scenario, there is an e-commerce logistics system that consists of one e-commerce enterprise, one third party logistics and one convenient store, while in the second scenario, competitive landscape is introduced, with two competing third party logistics involving in the system. For the first scenario, we propose five kinds of decision models for the e-commerce logistics system, respectively centralized decision model, decentralized decision model and three semi-centralized decision models. Backward induction method is applied to obtain Stackelberg equilibrium solutions of these models. With the comparison of different results, centralized model is found to offer the most order quantities, the highest service level, the lowest price and the best profit margins. But centralized decision-making is unrealistic since it requires e-commerce companies to build a self-support logistics system, which costs significant construction capital, operation and maintenance costs. Therefore e-commerce managers may choose a next-best way of the second semi-centralized decision-making, developing main transportation system privately but utilizing social network resources to cover "last mile" distribution. For the second situation, we propose three kinds of decision models, namely one centralized decision model and two decentralized decision models, while the second decentralized decision model is accompanied with a strategy of service rebates to ensure the existence of its equilibrium solutions. Backward induction method is used again to solve these models and the results show similar conclusions with the first scenario, that the overall profit should be lifted when the concentration degree of decision-making is enhanced. Also, the second decentralized decision model, under which the two logistics device levels are determined by e-commerce company but not third party logistics themselves, is found to be superior to the first one, because there are always some suitable coefficient of service rebates to create a larger profit level.For the most common decentralized condition that has the worst system performance in both scenarios, we also design a revenue sharing contract combined with a service cost sharing mechanism to perfectly coordinate order quantity and device level decisions, successfully achieving the same overall profit level with the centralized model through some controlled conditions setting of contract parameters. Shapley value method is used to specify values of parameters to equally allocate system earnings, ensuring Pareto improvement of all the members’profit to encourage them to join in this coordination mechanism. In addition, we present some numerical examples to observe the impacts of market circumstance change/members’strength change on coordination results and profit distributions under different decision-making models. For instance, we find it is more meaningful to adopt contract mode when logistics service qualities are highly valued by end customers.Lastly, based on the theoretical conclusions, this paper provide several management advices based on realistic operating of e-commerce logistics system,...