Managing homogeneous products in two competing supply chains under price and logistics service

Logistics services and product prices are two factors that influence consumers’ buying behavior. In recent years, research on decision and coordination of competing supply chains has attracted growing attention. However, the research of competing supply chains with substitutable products under logistics services and product prices has not been studied in the literature. We consider four decision variables, the manufacturers’ wholesale price, the distributors’ wholesale price, the retailer price and the logistics service level. The competition in product and pricing decisions of the supply chains are discussed based on centralized and decentralized channel structures. And then, effect of product substitutability upon decisions and coordination of the supply chains is analyzed. Finally, A numerical example illustrates the findings of the model are summarized for centralized, decentralized, and coordinated scenarios. The results from the analysis show that gross profit of supply chain under decentralized channel structure increases with the increasing product substitutability, but declines under centralized channel structure. The value region of benefit-sharing proportions under the centralized channel structure also shrinks, that is, the scope of bargaining that companies can make for their profit in the collaborations gets smaller and smaller when product substitutability increases.