More than a second channel? Supply chain strategies in B2B spot markets

Wei XING, Liming LIU, Shouyang WANG

Research output: Journal PublicationsJournal Article (refereed)

8 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)699-710
Number of pages12
JournalEuropean Journal of Operational Research
Volume239
Issue number3
Early online date8 Jul 2014
DOIs
Publication statusPublished - 16 Dec 2014

Keywords

  • Channel strategy
  • Pricing
  • Risk management
  • Spot market
  • Supply chain management

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