Analysis of Competitiveness in Agri-Supply Chain Logistics Outsourcing: A B2B Contractual Framework

Abstract

COVID-19 has left some permanent effects on the Regional Agri-Supply Chain (RASC). It has single-handedly accelerated the RASC’s performance through the globalization of local products and increased e-agri-business, virtual retailing trends, and smart logistics and warehousing services. The post-COVID worldwide growing demand for regional agri-products has increased the competitiveness in logistics outsourcing. Motivated by these changing notions, this paper addresses two major questions—whether the competitiveness in logistics outsourcing allows the supply chain drivers (supplier, retailer, and 3PL) to form a sustainable B2B pricing supply chain model, and what will be 3PL firms’ strategic decisions to secure sustainable profit under this competitiveness? In the light of competitive literature, this paper proposes two decision-making approaches, optimistic and pessimistic, models them using the Stackelberg game theory, and solves them using the subgame perfect Nash equilibrium. The result shows that, even after competitiveness in logistics outsourcing, the supply chain drivers agree to form a contractual supply chain. However, the competitive strategy-making of 3PL firms is a little tricky. Each focal 3PL firm must have perfect information about the peer firm’s strategic movement to choose its preferable strategy. Further, they can preferably constrain their core competencies (service price and quality level) to assure a sustainable profit.

A Review of Logistics Pricing Research Based on Game Theory

“…However, in the fresh supply chain, cold chain LSPs can maximize their market share by enhancing their core competencies due to market imperfections in real scenarios. Therefore, some scholars have constructed a supply-chain pricing model with cold chain LSPs as the leader [60,62,63]. In the logistics service supply chain (LSSC), LSIs are usually in the leading position, so scholars mostly use the Stackelberg game to study their pricing problem [37,39,[41][42][43].…”

“…On the other hand, some scholars have studied a three-stage B2C pricing model consisting of a cold chain LSP, e-commerce firms and consumers [60,61]. In addition, a B2B fresh supply-chain pricing model consisting of suppliers, retailers, and TPLs has also been studied [62,63]. Moreover, some papers have studied a two-stage pricing model for logistics firms and retailers [64,65].…”

“…In addition, Du and Han [44] introduced the logistics service quality defect rate in the study, describing the possibility that the logistics service quality provided by FLSP is lower than the customer's expectation. It is noteworthy that some studies regard logistics service level as one of the decision variables in the pricing model [43,[62][63][64].…”

“…Interestingly, although some studies do not introduce competition indicators, they do consider the impact of market competition. For example, De and Singh [62] believed that the core competitiveness of LSP comes from logistics service level and logistics service price. They studied the optimal price under pessimistic or optimistic competitive strategies of TPL.…”

Evaluation of competition strategies applied in logistics management during the pandemic process: A research on logistics companies in Istanbul

“…Different small and large retailers have started e-commerce portals. E-commerce is successfully Sustainability trending, even in the post-COVID-19 situation, because it offers retailers low risk in terms of inventory loss, price declination, and bargaining loss' (De & Singh, 2022) Supply chain activities mostly depend on market competition. Indeed, in the market, many organisations create different implementations for the final customer.…”