280 / 2024-04-24 08:58:22

Games of Procurement Strategy and Information Sharing in a Three-tier Cross-border Supply Chain

Procurement strategy,Information sharing,Cross-border supply chain,Co-opetition

Motivated by business phenomena from Li & Fung and Walmart, we investigate the retailers’ decisions on procurement strategies in a three-tier cross-border supply chain, consisting of a material supplier, a local retailer and a multinational corporation (MNC) that owns a logistics provider and an affiliated retailer). Specially, due to the existence of information technologies (i.e., Retail Link), the local retailers’ procurement strategy plays an essential role in the information structure in the supply chain. It is well observed that there are two typical procurement strategies: (1) Consignment, wherein the retailers directly source from the supplier; (2) Turnkey, wherein the retailers outsource procurement function to the MNC. In particular, we find that, the supplier’s pricing flexibility is restrained if both retailers choose turnkey, yet adopting turnkey does not always be beneficial for the retailers. We find that when relative market potential is low, the affiliated retailer chooses consignment and the local retailer chooses turnkey. We also show that when relative market potential is large, poor risk-free profit stimulates the affiliated (local) retailer to choose turnkey (consignment). However, the local retailer prefers turnkey if and only if great demand fluctuation creates sufficient information value in turnkey.