Emerging Operations Management Problems in the Presence of Competition

Intensified industrial competition, together with fast developments in new technologies, has brought new problems to operations management nowadays. In this thesis, we employ the game-theoretic approach to analyze some of the emerging problems.

In the first study, we investigate the coopetition effect of learning-by-doing which is a common economic phenomenon. We model the problem in a supply chain with two competing OEMs outsourcing to a common CM whose production exhibits the learning-by-doing effect. We find that the learning-by-doing effect intensifies the competition when two OEMs do not have cooperation.. OEMs’ total profits under separate learning could be lower than the case with no learning. When OEMs cooperate in learning, we find that the pooled cost reduction could function as a complementary resource which benefits both OEMs. The OEMs’ total profits under joint learning are always higher than the case with no learning. Moreover, when the learning speed and the competition intensity are relatively small, the cooperation effect may dominate the competition effect. As a result, the total profits of the OEMs could even increase with the competition intensity. The dominating role of cooperation effect is robust considering the CM’s pricing power and various pricing strategies including uniform pricing and myopic pricing. We also find that when the OEMs are differentiated in the market sizes, the structure of a common CM is not stable. The OEM with a much larger market size may prefer to outsource to a separate CM instead.

In the second study, we examine how the downstream competition may influence the usage and effectiveness of trade credit, a commonly used supply chain financing scheme. Specifically, we consider a supply chain in which a supplier sells to two competing retailers and either retailer may be financially distressed. We find that when financial statuses of the retailers are unbalanced (one retailer relying on the supplier’s trade credit and the other on its own capital), the supplier can benefit if the variance of demand shock is moderate. Given the demand uncertainty, the increasing competition intensity may induce the supplier to prefer the balanced retailers’ financial status. In addition, for either retailer, the improvement of its competitor’s financial capability is favorable if the variance of demand shock is high.

In the third study, we investigate product recovery strategies in a framework of competing supply chains, where two manufacturers sell through their respective retailers. Either manufacturer can choose between two product recovery strategies, collecting used products for remanufacturing by itself (that is, direct recovery) and assigning the task of product recovery to its retailer (indirect recovery). We examine how the competition intensity and the supply chain power structure may influence the equilibrium outcome and its efficiency. Our analysis indicates when the manufacturers and the retailers engage in a vertical Nash game, indirect recovery is the unique equilibrium and is Pareto efficient. However, when the parties engage in a leader-follower game, multiple equilibria occur when the competition intensity is high, and thus either direct recovery or indirect recovery may be chosen.