Supplier competition in decentralized assembly systems with price-sensitive and uncertain demand

Li Jiang, Yunzeng Wang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

60 Citations (Scopus)

Abstract

In a decentralized assembly supply chain, independent suppliers produce a set of complementary components from which an assembler assembles a final product and sells it to the market. In such a channel, several competitive forces interact with one another to affect the price and quantity decisions of the firms involved. These include: (1) the direct competition each supplier faces for producing the same component, (2) the indirect competition among the suppliers producing the set of complementary components needed for assembling the final product, and (3) the vertical interaction between the assembler and the component suppliers. This paper shows that the direct competition that one supplier faces helps improve the performance of the assembler and all the other suppliers in the channel; and surprisingly, it can help improve the performance of this particular supplier facing the competition as well. Second, the assembler benefits from a merger of suppliers producing different components in the complementary set. Furthermore, the assembler prefers a merger of suppliers with less direct competition over a merger of suppliers with more direct competition.
Original languageEnglish
Pages (from-to)93-101
Number of pages9
JournalManufacturing and Service Operations Management
Volume12
Issue number1
DOIs
Publication statusPublished - 1 Dec 2010

Keywords

  • Assembly systems
  • Noncooperative games
  • Price-production decisions
  • Supply chain management

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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