Coordination Of Economic And Environmental Sustainability Under Procurement Co-opetition Strategies

Given the Chinese government’s significant efforts to promote the sustainable development of supply chains(e.g.,the concept of green and high-quality development),this thesis focuses on co-opetition structures in procurement supply chains and the analysis of supply chain members’ procurement incentives.From the perspectives of direct procurement and procurement outsourcing strategies,this thesis analyzes how to improve the coordination of supply chain economic and environmental sustainability via the adjustments of procurement strategies.For direct procurement strategies,a firm is optional to procure raw materials/products from overseas or domestic suppliers.The firm has to bear high import tariffs under overseas procurement strategy,while domestic procurement strategy alters the upstream supply structure,introduces the price war between domestic suppliers,and subsequently changes the firm’s procurement costs.For procurement outsourcing strategies,a firm is optional to outsource the bundled functions of―procurement + other supply chain functions‖ to its supply chain partner(such as the procurement agent or contract manufacturer),or only outsource other supply chain functions and retain the procurement function.For both direct procurement and procurement outsourcing strategies,the firm’s prior objective of profit maximization fundamentally determines its strategic procurement decisions,which simultaneously exerts significant effects on environmental sustainability.This thesis notes the drawbacks of the extant literature on co-opetition strategies in procurement supply chains(which mostly only considers economic sustainability in procurement operations,i.e.,increasing profit),responds to the Chinese government’s call for the ―green development‖ of supply chains,emphasizes the structural characteristics of the procurement supply chains,and studies the co-opetition relationships based on the practical procurement operations.This thesis particularly focuses on the co-opetition game in procurement supply chains,characterizes and solves a series of problems of joint optimization and incentive analysis.This thesis is dedicated to achieving the coordination of supply chain economic and environmental sustainability via strategic procurement decisions.The results provide useful insights for the firm’s decision-making and the government’s policy formulation.The main research content and results are briefly summarized as follows:(1)Based on direct procurement strategies,this thesis establishes a game-theoretical model in a ―chain-chain‖ competition framework to study a firm’s direct procurement strategies considering import tariff and environmental supply disruption,and analyzes whether different direct procurement strategies could achieve the coordination of economic and environmental sustainability.Considering the scenario of import tariff,we show that import tariff increases the firm’s procurement costs under overseas procurement strategy,decreasing the procurement/production quantities to hurt economic sustainability.However,the decreased procurement/production quantities reduce production pollution emissions to improve environmental sustainability,which creates a deviation between economic and environmental sustainability.We further find that the government could effectively encourage the firm whose prior objective is improving economic sustainability(profit maximization)to choose domestic procurement strategy by increasing import tariff,thereby achieving the coordination of economic and environmental sustainability.Considering environmental supply disruption,the adjustments of direct procurement strategies could still achieve the coordination of economic and environmental sustainability.The increased risk of environmental supply disruption of the domestic suppliers facilitates the firm to become the monopolist in the downstream market under overseas procurement strategy,resulting in smaller total procurement/production quantities that are conducive to improving environmental sustainability.Such improvement is particularly significant when the firm has a significant advantage in unit production pollution.(2)Based on procurement outsourcing strategies,this thesis establishes a game-theoretical model of a three-tier supply chain in a competition framework to study the procurement outsourcing structures under the impact of channel pricing powers,and analyzes whether different procurement outsourcing structures could achieve the coordination of economic and environmental sustainability.This thesis characterizes a firm’s dual-source profit structure(the firm produces and sells two heterogeneous products:regular and sustainable products)under dual-product competition and the corresponding profit conflicts.We focus on how the dual-product competition affects the channel pricing powers of the supply chain upstream members,and how the altered channel pricing powers influence the firm’s procurement outsourcing cost that eventually changes its preferred outsourcing structures.We further identify three interactive effects affecting the firm’s procurement outsourcing strategies: cost increase effect,cost reduction effect,and market occupation effect,which affect the firm’s trade-off in different directions under alternative procurement outsourcing structures.We show that,only when the market potential of sustainable product is either low or high does the firm prefer to outsource the bundled procurement functions of both the regular and sustainable products to a contract manufacturer.In this case,the combined positive cost reduction and market occupation effects dominate the negative cost increase effect.We further show that both two procurement outsourcing structures could potentially achieve the coordination of economic and environmental sustainability.This result implies that the improvement of environmental sustainability depends not only on the market potential of the sustainable product,but also on the channel pricing powers of supply chain upstream members and the ensuing changes in the firm’s procurement outsourcing costs.(3)Based on procurement outsourcing strategies,this thesis establishes a game-theoretical model of a three-tier supply chain in a competition framework to study the procurement outsourcing structures under the impact of demand information disclosure,and analyzes whether different procurement outsourcing structures could achieve the coordination of economic and environmental sustainability.This thesis formulates two commonly observed mechanisms of demand information disclosure,in order to investigate how information asymmetry among supply chain members changes the firm’s payoffs at the information and non-information levels.This thesis further explores the role of information disclosure in the coordination of economic and environmental sustainability under different procurement outsourcing structures.We show that,only when a firm is insignificantly or significantly sensitive to demand uncertainty will it outsource the procurement function to the procurement agent.By analyzing the firm’s profits under the two procurement outsourcing structures,we show that both procurement outsourcing structures could create large profits for the firm through a small volume growth of procurement/production quantities,based on which the coordination of economic and environmental sustainability is achieved.