More than a second channel? Supply chain strategies in B2B spot markets
Document Type
Journal article
Source Publication
European Journal of Operational Research
Publication Date
12-16-2014
Volume
239
Issue
3
First Page
699
Last Page
710
Keywords
Channel strategy, Pricing, Risk management, Spot market, Supply chain management
Abstract
The emergence of B2B spot markets has greatly facilitated spot trading and impacted supply chain structures as well as the way commercial transactions take place between firms in many industries. While providing new opportunities, the B2B spot market also exposes participants to a price risk. This new business landscape raises some important questions on how the supplier and manufacturer should change their sales channel and procurement strategies and tailor their decisions to this changing environment. In this paper, we study the channel-choice, pricing and ordering/production decisions of the risk-averse supplier and manufacturer in a two-tier supply chain with a B2B spot market. Our analysis shows that, to benefit from the B2B spot market and control the risk exposure, the upstream supplier should develop an integrated channel-choice and pricing strategy. When the supplier adopts a dual-channel strategy, the equilibrium contract price decreases in the supplier's risk attitude, but increases in the demand uncertainty. However, it first decreases and then increases in the manufacturer's risk attitude and spot price volatility. We conclude that rather than simply being a second channel, the B2B spot market provides a strategic tool to supply chain members to achieve an advantageous position in their contract trading.
DOI
10.1016/j.ejor.2014.06.029
Print ISSN
03772217
E-ISSN
18726860
Publisher Statement
Copyright © 2014 Elsevier B.V.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Xing, W., Liu, L., & Wang, S. (2014). More than a second channel? Supply chain strategies in B2B spot markets. European Journal of Operational Research, 239(3), 699-710. doi: 10.1016/j.ejor.2014.06.029