Supply chain competition

Abstract

This thesis studies the influence of horizontal competition on supply chain performance. Unlike most of the existing literature which focuses on horizontal competition between echelon levels, we look at both the supply chain and the individual company’s performance with the presence of supply chain to supply chain competition.

Specifically, this thesis is composed of three individual research papers.

The first paper deals with chain-to-chain horizontal competition and considers price competition among an arbitrary number of supply chains by comparing two cases. In the first case each supply chain is vertically integrated, while in the second, decentralised, case the manufacturers and retailers act independently. We explore the effect of varying the level of price competition on the profitts of the industry participants and demonstrate the important role played by the spread of underlying market shares. The coefficient of variation of these market shares determines whether decentralised supply chains can outperform integrated supply chains with an appropriate level of competition.

The second and third papers focus on in-chain horizontal competition with capacity constraints. In the second paper, we look at a supply chain with one manufacturer and two downstream retailers. Based on total capacity available, the manufacturer needs to find ways to best use the capacity by determining whether or not to release the capacity information to retailers.

The third paper looks at competition in a more complicated supply chain structure. A retailer buys three brands of products from two manufacturers. One manufacturer produces both branded and private label products, and the other one manufactures a branded product only. With our model, we are able to determine the profits of each supply chain agent. At the end of the paper, we use data from the Australian milk industry and discuss a problem in which a manufacturer needs to decide how to allocate capacity between the national brand and the private label when there is a capacity shortage.