No abstract

Group Purchasing Organizations (GPOs) are well-known intermediary rms that play an important role in some supply chains. An important question that arises regarding GPOs is whether a GPO that bene ts from group buying discounts always bene ts Original Equipment Manufacturers (OEMs) under market competition. In other words, does the role of a GPO always result in a win-win outcome for OEMs and GPOs? In response, a bargaining framework has been used to investigate the procurement strategies of competing OEMs. The incorporation of a GPO in a two-tier supply chain consisting of two competing OEMs with a common supplier that has a quantity discount menu is analyzed. The result shows that low-purchasing cost for GPOs may harm OEMs from a cost-bene t perspective. This unintuitive result can be explained by di erent impacts that a GPO has on the purchasing process. Although a GPO can enlarge the size of trade surplus, it has important in uence on the size of the slice of the pie (pro t sharing). Moreover, the procurement strategy of an OEM in equilibrium depends on not only the bargaining power, but also the competing OEM. Interestingly, unlike a weak OEM, a strong one may not prefer procuring through GPO.