Topic: Competitor Cooperation in SourcingLinkingCost Saving to Improved Market Selling
Speaker: Li Jiang, the University of Michigan
Host: Pro. YANG Yi
Time: 9:30-11:30 October 12nd, 2017 (Thursday)
Venue: Room 1102
Abstract:
We consider two competing firms that order from a supplier, which offers a wholesale-price menu, and sell to uncertain markets. The firms can form a cooperative to order together from the supplier (joint sourcing) or unilaterally order from the supplier but obtain stocks from each other on a needed basis (horizontal sourcing). We show that the firms rely on sourcing cooperation to mitigate the competition pressure when the supplier offers a low or no discount, but save costs otherwise. Joint and horizontal sourcing are strategic substitutes in producing an efficiency effect on the firms’ profit through cost saving and improved market selling, though joint sourcing is more effective in this aspect. The two strategies are complements as well since the firms have the flexibility in pooling resources to utilize differential selling opportunities across markets only through horizontal sourcing. The interplay of the complementarity and substitutability of the two strategies has mixed profit implications for the firms and supplier. Importantly, sourcing cooperation between competing firms does not necessarily hurt the supplier and the firms’ increased orders under cooperation do not necessarily benefit the supplier either.
Joint work with Li Li
About the Speaker:
Li Jiang obtained his PhD in Operations and Management Science from the Ross School of Business in the University of Michigan. He joined the Department of Logistics and Maritime Studies in the Hong Kong Polytechnic Universityin 2007, and is now a Full Professor. His current research interests includeparametric and non-parametric estimation, complex channel design and analysis, information asymmetry and behavioral operations. He has published in Management Science, Manufacturing & Service Operations Management, Production and Operations Management and Operations Research Letters. He reviews manuscripts for these journals and serves on the editorial boards.
