Title

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.

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Full-text Version

Publisher’s Version

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