Service outsourcing under different supply chain power structures

Junsong Bian (), Kin Keung Lai and Zhongsheng Hua
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Junsong Bian: RMIT University
Kin Keung Lai: Shaanxi Normal University
Zhongsheng Hua: Zhejiang University

Annals of Operations Research, 2017, vol. 248, issue 1, No 5, 123-142

Abstract: Abstract This paper studies the impact of service outsourcing under three supply chain power structures: manufacturer-Stackelberg, vertical-Nash and retailer-Stackelberg supply chains. We first investigate price and service decisions by comparing the integrated channel and the decentralized channel with service outsourcing. It is found that a lower retail price or a higher service level could occur in the decentralized channel with service outsourcing compared to those in the integrated channel, but they never occur simultaneously. Next, we examine the manufacturer’s channel strategies, and demonstrate that service outsourcing can always help the manufacturer earn more profit from the decentralized channel than from the integrated channel in the manufacturer-Stackelberg and retailer-Stackelberg markets, as long as the retailer’s service investment is sufficiently efficient. However, in the vertical-Nash supply chain, this occurs only when the manufacturer is inefficient and the retailer is efficient enough in service provision. Finally, comparisons of channel efficiency and numerical analysis are provided.

Keywords: Service outsourcing; Channel power structure; Channel strategy; Supply chain efficiency; Supply chain management (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s10479-016-2228-y

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