Encroachment in a three-echelon supply chain: manufacturer encroachment or distributor encroachment
Asia Pacific Journal of Marketing and Logistics
ISSN: 1355-5855
Article publication date: 4 January 2022
Issue publication date: 22 November 2022
Abstract
Purpose
The purpose of this paper is to investigate manufacturer encroachment and distributor encroachment in a three-echelon supply chain consisting of an upside manufacturer, an intermediate distributor and a downside retailer.
Design/methodology/approach
In this paper, the authors use the optimization theory to mathematize the proposed question and build a model. First, the authors consider sequential quantity decisions, where the encroacher decides on the direct selling quantity after determining the retailer's order quantity. Second, the authors relax this sequential decision process assumption by reconsidering a circumstance in which quantity decisions are decided simultaneously.
Findings
In contrast to previous studies, this study shows that in three-echelon supply chains, the upside firm is more likely to encroach compared with the downside firm. The “bright side” of encroachment exists for all players only when the encroachment cost is at a moderate level. However, in manufacturer encroachment under simultaneous quantity decisions, the “bright side” skips the distributor but benefits the retailer directly as the encroachment cost increases from zero to a certain level. The main reason lies in that the distributor loses its pricing power because the end-market has been disturbed by the simultaneous quantity decisions. A comparison of the results of sequential and simultaneous quantity decisions reveals the merit of simultaneous quantity decisions. The authors find that the intermediate role (the distributor in our model) in three-echelon supply chains may benefit more from simultaneous quantity decisions. That is, the distributor may achieve a better profit even in a market with intensified competition.
Originality/value
The findings of this paper contribute to the marketing science literature on encroachment. The majority of existing literature has focused on manufacturer encroachment in two-echelon supply chains. This paper innovatively investigates and compares manufacturer encroachment and distributor encroachment in a three-echelon supply chain.
Keywords
Acknowledgements
This research was supported by the National Natural Science Foundation of China (grant number: 72171232; 71901091; 71701073).
Citation
Wang, T., Liang, Y. and Zheng, Z. (2022), "Encroachment in a three-echelon supply chain: manufacturer encroachment or distributor encroachment", Asia Pacific Journal of Marketing and Logistics, Vol. 34 No. 10, pp. 2386-2409. https://doi.org/10.1108/APJML-04-2021-0225
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited