IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v255y2023ics0925527322002377.html
   My bibliography  Save this article

Upstream encroachment and downstream outsourcing in competing shipping supply chains

Author

Listed:
  • Zhang, Li-Hao
  • Liu, Chunxiao
  • Zhang, Cheng
  • Wang, Shanshan

Abstract

In practical business, freight forwarders not only cope with homogeneous competition, but also may face with the potential threat from ocean shipping (OS) companies who encroach on the downstream market for cargo-canvassing. Meanwhile, freight forwarders can tactically decide whether to outsource both ocean shipping and inland shipping tasks or only ocean shipping task to OS companies (i.e., turnkey or consignment). To reveal the interaction between OS companies' cargo-canvassing encroachment and freight forwarders' service outsourcing tactics, we propose an analytical model, which consists of two competing shipping supply chains, and obtain several interesting findings. Our study shows that, cargo-canvassing encroachment benefits OS companies but hurts freight forwarders when they have no significant cargo-canvassing advantages. However, with increased cargo-canvassing capability, freight forwarders possess a “capability effect” that can deter OS companies' encroachment by transforming outsourcing tactic from turnkey to consignment. Surprisingly, entrant OS company's direct encroachment enables to benefit its exclusive freight forwarder in the presence of counterpart OS company's indirect encroachment, that is, a choice between the lesser of two evils, because the direct encroachment has an additional price advantage in driving down ocean shipping service fee for its exclusive freight forwarder. Further, freight forwarders might fall into a “prisoner's dilemma” if both of them choose consignment in a two encroaching shipping supply chains, and turnkey is a more profitable decision for them under such a circumstance.

Suggested Citation

  • Zhang, Li-Hao & Liu, Chunxiao & Zhang, Cheng & Wang, Shanshan, 2023. "Upstream encroachment and downstream outsourcing in competing shipping supply chains," International Journal of Production Economics, Elsevier, vol. 255(C).
    • Handle: RePEc:eee:proeco:v:255:y:2023:i:c:s0925527322002377
    DOI: 10.1016/j.ijpe.2022.108655
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527322002377
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2022.108655?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lafkihi, Mariam & Pan, Shenle & Ballot, Eric, 2019. "Freight transportation service procurement: A literature review and future research opportunities in omnichannel E-commerce," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 348-365.
    2. Wang, Fan & Zhuo, Xiaopo & Niu, Baozhuang & He, Jiayi, 2017. "Who canvasses for cargos? Incentive analysis and channel structure in a shipping supply chain," Transportation Research Part B: Methodological, Elsevier, vol. 97(C), pages 78-101.
    3. M Rekik & S Mellouli, 2012. "Reputation-based winner determination problem for combinatorial transportation procurement auctions," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(10), pages 1400-1409, October.
    4. Wang, Junjin & Liu, Jiaguo & Wang, Fan & Yue, Xiaohang, 2021. "Blockchain technology for port logistics capability: Exclusive or sharing," Transportation Research Part B: Methodological, Elsevier, vol. 149(C), pages 347-392.
    5. Zhang, Jianqiang & Cao, Qingning & He, Xiuli, 2020. "Manufacturer encroachment with advertising," Omega, Elsevier, vol. 91(C).
    6. Xing Hu & René Caldentey & Gustavo Vulcano, 2013. "Revenue Sharing in Airline Alliances," Management Science, INFORMS, vol. 59(5), pages 1177-1195, May.
    7. Li, Li & Zhang, Rachel Q., 2015. "Cooperation through capacity sharing between competing forwarders," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 75(C), pages 115-131.
    8. Gendao Li & Yu Zhou, 2016. "Strategically decentralise when encroaching on a dominant supplier," International Journal of Production Research, Taylor & Francis Journals, vol. 54(10), pages 2989-3005, May.
    9. Jiang, Changmin & Zhang, Anming, 2014. "Effects of high-speed rail and airline cooperation under hub airport capacity constraint," Transportation Research Part B: Methodological, Elsevier, vol. 60(C), pages 33-49.
    10. Song, Zhuzhu & Tang, Wansheng & Zhao, Ruiqing, 2020. "A simple game theoretical analysis for incentivizing multi-modal transportation in freight supply chains," European Journal of Operational Research, Elsevier, vol. 283(1), pages 152-165.
    11. Saeed, Naima, 2013. "Cooperation among freight forwarders: Mode choice and intermodal freight transport," Research in Transportation Economics, Elsevier, vol. 42(1), pages 77-86.
    12. Jin Xu & Xiaohan Zhou & Jianghua Zhang & Daniel Zhuoyu Long, 2021. "The optimal channel structure with retail costs in a dual-channel supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 59(1), pages 47-75, January.
    13. Li-Hao Zhang & Lin Tian & Lu-Yu Chang, 2022. "Equilibrium strategies of channel structure and RFID technology deployment in a supply chain with manufacturer encroachment," International Journal of Production Research, Taylor & Francis Journals, vol. 60(6), pages 1890-1912, March.
    14. Mariam Lafkihi & Shenle Pan & Eric Ballot, 2019. "Freight transportation service procurement: A literature review and future research opportunities in omnichannel E-commerce," Post-Print hal-02086154, HAL.
    15. Ishii, Masahiro & Lee, Paul Tae-Woo & Tezuka, Koichiro & Chang, Young-Tae, 2013. "A game theoretical analysis of port competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 92-106.
    16. Hu, Qian & Zhang, Zhenzhen & Lim, Andrew, 2016. "Transportation service procurement problem with transit time," Transportation Research Part B: Methodological, Elsevier, vol. 86(C), pages 19-36.
    17. Anil Arya & Brian Mittendorf & David E. M. Sappington, 2007. "The Bright Side of Supplier Encroachment," Marketing Science, INFORMS, vol. 26(5), pages 651-659, 09-10.
    18. Dong, Gang & Huang, Rongbing & Ng, Peggy, 2016. "Tacit collusion between two terminals of a port," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 199-211.
    19. Su Xiu Xu & George Q. Huang, 2017. "Efficient Multi‐Attribute Multi‐Unit Auctions for B2B E‐Commerce Logistics," Production and Operations Management, Production and Operations Management Society, vol. 26(2), pages 292-304, February.
    20. Zhang, Anming & Fu, Xiaowen & Yang, Hangjun (Gavin), 2010. "Revenue sharing with multiple airlines and airports," Transportation Research Part B: Methodological, Elsevier, vol. 44(8-9), pages 944-959, September.
    21. Roma, Paolo & Zambuto, Fabio & Perrone, Giovanni, 2014. "Price dispersion, competition, and the role of online travel agents: Evidence from business routes in the Italian airline market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 69(C), pages 146-159.
    22. Lin, Ming Hsin, 2008. "Airline alliances and entry deterrence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(4), pages 637-652, July.
    23. Lalive, Rafael & Luechinger, Simon & Schmutzler, Armin, 2018. "Does expanding regional train service reduce air pollution?," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 744-764.
    24. Eon-Seong Lee & Dong-Wook Song, 2015. "Competition and Co-operation in Maritime Logistics Operations," International Series in Operations Research & Management Science, in: Chung-Yee Lee & Qiang Meng (ed.), Handbook of Ocean Container Transport Logistics, edition 127, chapter 16, pages 477-496, Springer.
    25. Wang, Junjin & Liu, Jiaguo & Zhang, Xin, 2020. "Service purchasing and market-entry problems in a shipping supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 136(C).
    26. Asadabadi, Ali & Miller-Hooks, Elise, 2018. "Co-opetition in enhancing global port network resiliency: A multi-leader, common-follower game theoretic approach," Transportation Research Part B: Methodological, Elsevier, vol. 108(C), pages 281-298.
    27. Qin, Hu & Luo, Meifeng & Gao, Xiang & Lim, Andrew, 2012. "The freight allocation problem with all-units quantity-based discount: A heuristic algorithm," Omega, Elsevier, vol. 40(4), pages 415-423.
    28. Mansini, Renata & Savelsbergh, Martin W.P. & Tocchella, Barbara, 2012. "The supplier selection problem with quantity discounts and truckload shipping," Omega, Elsevier, vol. 40(4), pages 445-455.
    29. Zhang, Shengrun & Derudder, Ben & Fuellhart, Kurt & Witlox, Frank, 2018. "Carriers’ entry patterns under EU-US open skies agreement," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 111(C), pages 101-112.
    30. Andrew Lim & Brian Rodrigues & Zhou Xu, 2008. "Transportation Procurement with Seasonally Varying Shipper Demand and Volume Guarantees," Operations Research, INFORMS, vol. 56(3), pages 758-771, June.
    31. Song, Zhuzhu & Tang, Wansheng & Zhao, Ruiqing, 2019. "Encroachment and canvassing strategy in a sea-cargo service chain with empty container repositioning," European Journal of Operational Research, Elsevier, vol. 276(1), pages 175-186.
    32. Ching-Chiao Yang & Yu-Kuo Chang, 2019. "Crucial factors influencing international logistics operations for African landlocked countries – A case study of Burkina Faso," Maritime Policy & Management, Taylor & Francis Journals, vol. 46(8), pages 939-956, November.
    33. Niu, Baozhuang & Dai, Zhipeng & Zhuo, Xiaopo, 2019. "Co-opetition effect of promised-delivery-time sensitive demand on air cargo carriers’ big data investment and demand signal sharing decisions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 123(C), pages 29-44.
    34. Barbot, Cristina, 2009. "Airport and airlines competition: Incentives for vertical collusion," Transportation Research Part B: Methodological, Elsevier, vol. 43(10), pages 952-965, December.
    35. Kundu, Tanmoy & Sheu, Jiuh-Biing, 2019. "Analyzing the effect of government subsidy on shippers’ mode switching behavior in the Belt and Road strategic context," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 129(C), pages 175-202.
    36. Varella, Rafael R. & Frazão, Jessica & Oliveira, Alessandro V.M., 2017. "Dynamic pricing and market segmentation responses to low-cost carrier entry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 98(C), pages 151-170.
    37. Wang, Junjin & Liu, Jiaguo, 2019. "Vertical contract selection under chain-to-chain service competition in shipping supply chain," Transport Policy, Elsevier, vol. 81(C), pages 184-196.
    38. Parola, Francesco & Notteboom, Theo & Satta, Giovanni & Rodrigue, Jean-Paul, 2013. "Analysis of factors underlying foreign entry strategies of terminal operators in container ports," Journal of Transport Geography, Elsevier, vol. 33(C), pages 72-84.
    39. Wang, Fan & Zhuo, Xiaopo & Niu, Baozhuang, 2017. "Strategic entry to regional air cargo market under joint competition of demand and promised delivery time," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 317-336.
    40. Zhang, Li-Hao & Zhang, Cheng, 2022. "Manufacturer encroachment with capital-constrained competitive retailers," European Journal of Operational Research, Elsevier, vol. 296(3), pages 1067-1083.
    41. Sun, Jiasen & Li, Guo & Xu, Su Xiu & Dai, Wei, 2019. "Intermodal transportation service procurement with transaction costs under belt and road initiative," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 127(C), pages 31-48.
    42. Sheng, Dian & Li, Zhi-Chun & Fu, Xiaowen & Gillen, David, 2017. "Modeling the effects of unilateral and uniform emission regulations under shipping company and port competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 101(C), pages 99-114.
    43. Christiansen, Marielle & Hellsten, Erik & Pisinger, David & Sacramento, David & Vilhelmsen, Charlotte, 2020. "Liner shipping network design," European Journal of Operational Research, Elsevier, vol. 286(1), pages 1-20.
    44. Xu, Su Xiu & Huang, George Q., 2013. "Transportation service procurement in periodic sealed double auctions with stochastic demand and supply," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 136-160.
    45. Niu, Baozhuang & Mu, Zihao, 2020. "Sustainable efforts, procurement outsourcing, and channel co-opetition in emerging markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 138(C).
    46. Xiao, Feng & Yang, Hai & Han, Deren, 2007. "Competition and efficiency of private toll roads," Transportation Research Part B: Methodological, Elsevier, vol. 41(3), pages 292-308, March.
    47. Peter W. De Langen & Athanasios A. Pallis, 2007. "Entry barriers in seaports," Maritime Policy & Management, Taylor & Francis Journals, vol. 34(5), pages 427-440, October.
    48. Mantin, Benny & Koo, Bonwoo, 2009. "Dynamic price dispersion in airline markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(6), pages 1020-1029, November.
    49. Albers, Sascha & Koch, Benjamin & Ruff, Christine, 2005. "Strategic alliances between airlines and airports—theoretical assessment and practical evidence," Journal of Air Transport Management, Elsevier, vol. 11(2), pages 49-58.
    50. Choi, Tsan-Ming & Chung, Sai-Ho & Zhuo, Xiaopo, 2020. "Pricing with risk sensitive competing container shipping lines: Will risk seeking do more good than harm?," Transportation Research Part B: Methodological, Elsevier, vol. 133(C), pages 210-229.
    51. Albert Y. Ha & Shilu Tong, 2008. "Contracting and Information Sharing Under Supply Chain Competition," Management Science, INFORMS, vol. 54(4), pages 701-715, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Li-Hao & Li, Wen-Jing & Zhang, Cheng & Wang, Shanshan, 2023. "Outsourcing strategy of an original equipment manufacturer in a sustainable supply chain: Whether and how should a contract manufacturer encroach?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    2. Housheng Duan & Jiayan Xu, 2023. "Remanufacturing and Product Recovery Strategies Considering Chain-to-Chain Competition and Power Structures," Sustainability, MDPI, vol. 15(10), pages 1-26, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Junjin & Liu, Jiaguo & Zhang, Xin, 2020. "Service purchasing and market-entry problems in a shipping supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 136(C).
    2. Zhang, Li-Hao & Zhang, Yang-Guang & Wang, Shan-Shan, 2022. "Ocean shipping company’s encroachment with outsourcing competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
    3. Wang, Junjin & Liu, Jiaguo & Wang, Fan & Yue, Xiaohang, 2021. "Blockchain technology for port logistics capability: Exclusive or sharing," Transportation Research Part B: Methodological, Elsevier, vol. 149(C), pages 347-392.
    4. Liu, Jiaguo & Wang, Junjin, 2019. "Carrier alliance incentive analysis and coordination in a maritime transport chain based on service competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 333-355.
    5. Lafkihi, Mariam & Pan, Shenle & Ballot, Eric, 2019. "Freight transportation service procurement: A literature review and future research opportunities in omnichannel E-commerce," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 348-365.
    6. Guo, Jiantao & Zhang, Juliang & Cheng, T.C.E. & Zhao, Shouting, 2022. "Truthful double auction mechanisms for online freight platforms with transaction costs," Transportation Research Part B: Methodological, Elsevier, vol. 158(C), pages 164-186.
    7. Yu, Hao & Huang, Min & Chao, Xiuli & Yue, Xiaohang, 2022. "Truthful multi-attribute multi-unit double auctions for B2B e-commerce logistics service transactions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 164(C).
    8. Li-Hao Zhang & Cheng Zhang & Jie Yang, 2023. "Impacts of power structure and financing choice on manufacturer’s encroachment in a supply chain," Annals of Operations Research, Springer, vol. 322(1), pages 273-319, March.
    9. Wang, Fan & Zhuo, Xiaopo & Niu, Baozhuang & He, Jiayi, 2017. "Who canvasses for cargos? Incentive analysis and channel structure in a shipping supply chain," Transportation Research Part B: Methodological, Elsevier, vol. 97(C), pages 78-101.
    10. Zhang, Li-Hao & Li, Wen-Jing & Zhang, Cheng & Wang, Shanshan, 2023. "Outsourcing strategy of an original equipment manufacturer in a sustainable supply chain: Whether and how should a contract manufacturer encroach?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    11. Niu, Baozhuang & Dai, Zhipeng & Zhuo, Xiaopo, 2019. "Co-opetition effect of promised-delivery-time sensitive demand on air cargo carriers’ big data investment and demand signal sharing decisions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 123(C), pages 29-44.
    12. Wang, Fan & Zhuo, Xiaopo & Niu, Baozhuang, 2017. "Strategic entry to regional air cargo market under joint competition of demand and promised delivery time," Transportation Research Part B: Methodological, Elsevier, vol. 104(C), pages 317-336.
    13. Zhang, Juliang & Xiang, Jie & Cheng, T.C. Edwin & Hua, Guowei & Chen, Cheng, 2019. "An optimal efficient multi-attribute auction for transportation procurement with carriers having multi-unit supplies," Omega, Elsevier, vol. 83(C), pages 249-260.
    14. Dellbrügge, Marius & Brilka, Tim & Kreuz, Felix & Clausen, Uwe, 2022. "Auction design in strategic freight procurement," Chapters from the Proceedings of the Hamburg International Conference of Logistics (HICL), in: Kersten, Wolfgang & Jahn, Carlos & Blecker, Thorsten & Ringle, Christian M. (ed.), Changing Tides: The New Role of Resilience and Sustainability in Logistics and Supply Chain Management – Innovative Approaches for the Shift to a New , volume 33, pages 295-325, Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management.
    15. Tsunoda, Yushi, 2023. "Airport concession revenue sharing and entry deterrence," Economics of Transportation, Elsevier, vol. 33(C).
    16. Wang, Jian & Zhu, Wenbo, 2023. "Analyzing the development of competition and cooperation among ocean carriers considering the impact of carbon tax policy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    17. Wang, Junjin & Liu, Jiaguo, 2019. "Vertical contract selection under chain-to-chain service competition in shipping supply chain," Transport Policy, Elsevier, vol. 81(C), pages 184-196.
    18. Song, Zhuzhu & Tang, Wansheng & Zhao, Ruiqing, 2018. "Cooperation mode for a liner company with heterogeneous ports: Business cooperation vs. port investment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 513-533.
    19. Niu, Baozhuang & Xu, Haotao & Xie, Fengfeng, 2021. "Free shipping in cross-border supply chains considering tax disparity and carrier’s pricing decisions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    20. Chuanxu Wang & Lingli Wang, 2023. "Green investment and vertical alliances in the maritime supply chain," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(7), pages 6657-6687, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:255:y:2023:i:c:s0925527322002377. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.