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Leadership and Competition in Network Supply Chains

Author

Listed:
  • Pranab Majumder

    (Fuqua School of Business, Duke University, Durham, North Carolina 27708)

  • Ashok Srinivasan

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089)

Abstract

This paper considers network supply chains with price dependent demand by modelling them as large acyclic networks. Such large networks are common in the automobile and apparel industries. We develop a model to analyze the effect of these large-scale problems involving long sequences of contracts, and show that contract leadership, as well as leader position in the network, affect the performance of the entire supply chain. We generalize Spengler (Spengler, J. 1950. Vertical integration and anti-trust policy. J. Political Econom. 58 347-352) to a game on a "contract tree" for a particular supply chain and extend the concept of double marginalization so that it can be applied in the form of a transformation to each contract that is offered by one member to another in the "contract tree." We construct an algorithm to find the equilibrium solution, and derive the optimal location of the leader ("optimal" being the leader location that maximizes total supply chain profits). Our work formalizes many intuitive insights; for example, member profits are determined by systemwide rather than individual costs. Finally, we model Cournot competition between competing supply chains (both two heterogeneous trees and multiple identical trees) and show the effect of changes in leader position as well as cost structure on the equilibrium.

Suggested Citation

  • Pranab Majumder & Ashok Srinivasan, 2008. "Leadership and Competition in Network Supply Chains," Management Science, INFORMS, vol. 54(6), pages 1189-1204, June.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:6:p:1189-1204
    DOI: 10.1287/mnsc.1070.0752
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    References listed on IDEAS

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    6. Ghavamifar, Ali & Makui, Ahmad & Taleizadeh, Ata Allah, 2018. "Designing a resilient competitive supply chain network under disruption risks: A real-world application," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 87-109.
    7. Dolores R. Santos-Peñate & Clara M. Campos-Rodríguez & José A. Moreno-Pérez, 2020. "A Kernel Search Matheuristic to Solve The Discrete Leader-Follower Location Problem," Networks and Spatial Economics, Springer, vol. 20(1), pages 73-98, March.
    8. Priya, Bhawna & Biswas, Indranil & Agrawal, Anupam, 2023. "The over-ordering problem in trade credit: Role of return policies," European Journal of Operational Research, Elsevier, vol. 309(2), pages 731-744.
    9. Rezapour, Shabnam & Farahani, Reza Zanjirani & Dullaert, Wout & De Borger, Bruno, 2014. "Designing a new supply chain for competition against an existing supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 67(C), pages 124-140.
    10. Ehsan Shekarian & Simme Douwe Flapper, 2021. "Analyzing the Structure of Closed-Loop Supply Chains: A Game Theory Perspective," Sustainability, MDPI, vol. 13(3), pages 1-32, January.
    11. Malgorzata Pankowska, 2019. "Information Technology Outsourcing Chain: Literature Review and Implications for Development of Distributed Coordination," Sustainability, MDPI, vol. 11(5), pages 1-28, March.
    12. Oliveira, Fernando S. & Ruiz, Carlos & Conejo, Antonio J., 2013. "Contract design and supply chain coordination in the electricity industry," European Journal of Operational Research, Elsevier, vol. 227(3), pages 527-537.
    13. Farahani, Reza Zanjirani & Rezapour, Shabnam & Drezner, Tammy & Fallah, Samira, 2014. "Competitive supply chain network design: An overview of classifications, models, solution techniques and applications," Omega, Elsevier, vol. 45(C), pages 92-118.
    14. Viswanathan Vish Krishnan & Junghee Lee & Oleksiy Mnyshenko & Hyoduk Shin, 2019. "Inclusive Innovation: Product Innovation in Technology Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 21(2), pages 327-345, April.
    15. Kumoi, Yuki & Matsubayashi, Nobuo, 2014. "Vertical integration with endogenous contract leadership: Stability and fair profit allocation," European Journal of Operational Research, Elsevier, vol. 238(1), pages 221-232.
    16. Anupam Agrawal & Luk N. Van Wassenhove & Arnoud De Meyer, 2014. "The Sourcing Hub and Upstream Supplier Networks," Manufacturing & Service Operations Management, INFORMS, vol. 16(2), pages 238-250, May.
    17. Li, Hongmin & Wang, Yimin & Yin, Rui & Kull, Thomas J. & Choi, Thomas Y., 2012. "Target pricing: Demand-side versus supply-side approaches," International Journal of Production Economics, Elsevier, vol. 136(1), pages 172-184.
    18. Xiaojing Liu, 2016. "Contracting for Competitive Supply Chains under Network Externalities and Demand Uncertainty," Discrete Dynamics in Nature and Society, Hindawi, vol. 2016, pages 1-9, April.
    19. Choi, Tsan-Ming & Li, Yongjian & Xu, Lei, 2013. "Channel leadership, performance and coordination in closed loop supply chains," International Journal of Production Economics, Elsevier, vol. 146(1), pages 371-380.
    20. Ying Zhang & Jayashankar M. Swaminathan, 2020. "Warehouse Location in An Emerging Country: A Win–Win Proposition?," Production and Operations Management, Production and Operations Management Society, vol. 29(6), pages 1487-1505, June.
    21. Sánchez, José M. & Vélez, María L. & Ramón-Jerónimo, María A., 2012. "Do suppliers' formal controls damage distributors' trust?," Journal of Business Research, Elsevier, vol. 65(7), pages 896-906.
    22. Agrawal, Anupam, 2014. "Managing raw material in supply chains," European Journal of Operational Research, Elsevier, vol. 239(3), pages 685-698.
    23. C. Gizem Korpeoglu & Ersin Körpeoğlu & Soo-Haeng Cho, 2020. "Supply Chain Competition: A Market Game Approach," Management Science, INFORMS, vol. 66(12), pages 5648-5664, December.
    24. Soo-Haeng Cho, 2014. "Horizontal Mergers in Multitier Decentralized Supply Chains," Management Science, INFORMS, vol. 60(2), pages 356-379, February.
    25. Rezapour, Shabnam & Farahani, Reza Zanjirani & Pourakbar, Morteza, 2017. "Resilient supply chain network design under competition: A case study," European Journal of Operational Research, Elsevier, vol. 259(3), pages 1017-1035.

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