Research On Procurement And Pricing Decisions Of Competing Retailers Under Supply Disruptions

In recent years,with the prevalence of outsourcing and the globalization of procurement,supply chains have become more and more fragile,and thus the frequency of supply disruption has been increasing.At the same time,enterprises are faced with more intense market competition environment,which makes it more important for them to maintain supply stability.In this context,it is of great practical significance to study the issue of how to manage the supply disruption risk.In practice,dual sourcing instead of single sourcing has become a widely used procurement strategy to mitigate supply disruption risk.Meanwhile,responsive pricing strategy can be adopted to reduce the losses caused by supply disruptions.Based on this,this paper investigates the optimal decisions of the retailers that adopt both dual sourcing strategy and responsive pricing strategy to manage supply disruption risk.Moreover,taking into account the complex competition relationships among the supply chain members,a secondary supply chain consisting of two competing suppliers and two competing retailers is constructed.Specifically,under the basic assumption in which the suppliers are leaders and the retailers are followers in a game,a three-stage game model is established.At the first stage,the suppliers set their wholesale prices.At the second stage,based on the given wholesale prices,the retailers determine their order quantities from different suppliers.At the third stage,after knowing the delivered quantity,the retailers set their retail prices.By solving the model,the equilibrium solutions are obtained,and then we perform sensitive analysis with respect to the reliability of suppliers,disruption correlation between the suppliers and price competition intensity between the retailers.The results show that:(1)Under supply disruption risk,the wholesale price and reliability of suppliers together influence the retailers’ optimal order quantities from different suppliers.Therefore,the retailers do not necessarily order more from the supplier with lower wholesale price or the supplier with higher reliability.(2)In addition,the optimal order allocation decision is greatly affected by the price competition intensity between the retailers: Given the production cost and reliability of suppliers,when competition intensity between the retailers is low,which means responsive pricing strategy is effective,retailers are more concerned about the reduction of procurement cost,so they order more from the supplier with lower wholesale price;When competition intensity between the retailers is high,which means responsive pricing strategy becomes less effective,retailers are more concerned about the improvement of supply stability,so they order more from the supplier with higher reliability.(3)Although an increase in the disruption correlation weakens the diversification benefits of dual sourcing strategy,it intensifies the price competition between the suppliers,resulting in lower wholesale prices,which will eventually increase retailers’ profit and conversely reduce suppliers’ profit.In a word,a highly correlated supplier portfolio will hurt suppliers but benefit retailers.(4)An increase in the reliability of any supplier will not only benefit the supplier itself but also the retailers,and especially when the supplier with a cost advantage improves its reliability,the retailers benefit more.This paper has important implications for enterprises.From the perspective of downstream retailers,in the context of dual sourcing,they should choose the suppliers with highly correlated disruptions when it comes to selecting suppliers,and should pay full attention to the price competition intensity between the retailers when it comes to the order allocation decision.From the perspective of upstream suppliers,in the context of competition between suppliers,they can improve their competitiveness by two means:improving reliability and reducing production cost.However,different supplier should have different preferences for these two means: The supplier with a cost advantage should pay more attention to improving reliability,while the supplier with a reliability advantage should pay more attention to reducing production cost.