Research On Business Extension Of The Supplier For Improving Supply Chain Management Capability

In homogeneous semi-products competition, a lot of domestic logistics suppliersare often faced with some problems such as service innovation, transfer payment inVMI, cooperation and sharing of resources. For the above problems, based onresearch theories，methods and new results of supply chain management, this paperproposes business extension strategy of a supplier to improve supply chainmanagement capability and discusses the following items:(1) The motivation is analyzed that a supplier implements business extension. Aprice and quality competition model of a full product in two supply chain isestablished to determine the full product’s price range and quality range，and then theoptimal price and quality are obtained. The research shows that the supplier with corecompetencies could reduce the unit cost and improve quality of the full productthrough business extension.(2) Business extension is a kind of service innovation strategy that integratesproducts and services. It is very popular to study combination of products and servicesin recent years. Based on the theory of service innovation and Hotelling Game Model,competitive advantage of differentiation and cost leadership in the combination ofproducts and services is analyzed. It is demonstrated that the supplier may createcompetitive advantage of differentiation and cost leadership from the perspective ofintegration service innovation through business extension.(3) Business extension achieves Pareto improvement for supply chain under VMImode. Due to the impact of increased inventory cost and buyers’ transfer payment onoperational efficiency of VMI, this research finds that when the logistics supplierprovides full-products for the downstream enterprise by the use of business extension,lower loss, lower inventory, shorter inventory cycle of semi-products and higherdistribution efficiency of full-products can increase the logistics supplier’s revenue,and then the goal of win-win cooperation is also realized under VMI mode. Thebusiness extension may provide a new research idea for VMI coordination strategy insupply chain management.(4) Business extension is a way to effectively implement resource leverage. Inrecent years, it is concerned about the way to implement resource leverage. Based onstudy on resource leverage and MICK resources, it is studied for the supplier how tooptimize its internal resources, and to extend its product line and service line into thebusiness field of the downstream enterprise, aiming at providing full-products for thedownstream enterprise, which rapidly has competitive resources integrated. The case study shows that the business extension strategy of the logistics supplier can makeresource leverage play an effective role in resource operations management, so as tostrengthen supply chain management.