Should a retailer sell its own extended warranties or resell those from the manufacturer when confronting supplier encroachment?

Chai, Jian; Li, Hengyu; Yan, Wei; Li, Youwei

doi:10.1080/01605682.2020.1759383

Cited by 14 publications

(6 citation statements)

References 33 publications

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“…Comparing with Li et al (2012), Zhang, Guan, et al (2020) consider the situation where both the manufacturer and the retailer sell EWs simultaneously and investigate the optimal choice among these three situations. Chai et al (2021) focus on the choice of the retailers whether to provide the EW by themselves. In the above literature, previous studies mainly focus on the selection of EW sellers, whereas our paper focuses on the selection of product after‐sales maintenance service providers, which means that the EW is solely sold by the firm.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal maintenance service outsourcing strategy considering extended warranty service

Cao

Han

et al. 2022

Manage Decis Econ

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In recent years, extended warranty (EW) services are widely provided by brand firms.Given that third-party maintenance service providers have more maintenance cost advantages than brand firms, brand firms face the challenge of whether to enter the maintenance service market. To address the above challenge and issue, we develop theoretical models. The research shows that the cost coefficient of developing maintenance service plays a critical role in the optimal maintenance service operation strategy. And the base market sizes of the EW and the charged maintenance service have significant influences on the results. Moreover, we propose conditions for a win-win outcome. | INTRODUCTIONWith the increasing price competition of products, the profit space of firms has declined. To promote product competitiveness and help consumers to avoid risk, more and more firms have begun to provide extended warranty (EW) services that can bring considerable profits (Hsiao et al., 2010;Lam & Lam, 2001). Though the handsome profit brought by EWs, firms should bear the heavy cost of operating that bothers some firms. It is noteworthy that the warranty services cost of Tesla is $123 million in 2017 (Guajardo et al., 2016). In this context, though there are still many brand firms providing after-sales services by themselves, like Huawei, OPPO, and DJI (DJI, 2021;Huawei, 2021;OPPO, 2021), an increasing number of brand firms select a low investment and low responsibility way, that is, outsourcing.Outsourcing, as an efficient strategy, is widely used by majority brand firms and helps firms to avoid the heavy operating cost and to focus on their core competencies, such as Nike and Apple who outsource their production line. Besides production outsourcing, service outsourcing is particularly common nowadays, such as logistics service, pre-sale service, and after-sales service. Outsourcing aftersale services to the third-party service providers lowers the barrier of entering into the great potential EW market for some firms without enough resources and contributes to focusing on the core businesses for some giant firms by avoiding the huge costs of establishing and operating service networks and wasting limited resources (Kurvinen et al., 2016;Yoo et al., 2021). For instance, BMW outsources its warranty services to a third-party service provider (Esmaeili et al., 2014).And JD outsources the after-sales maintenance service of their brand "JD Manufacture" to a third-party service provider, Baixiubao (ITS, 2017). It also plays an important role in avoiding competition and improving the performance of the entire supply chain by allowing professionals to handle professional issues. On a whole, there is no doubt that the outsourcing after-sale services strategy is an efficient way to reduce the operating cost for firms. Besides, it is also a good way to improve service convenience.

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Section: Literature Reviewmentioning

confidence: 99%

Optimal maintenance service outsourcing strategy considering extended warranty service

Cao

Han

et al. 2022

Manage Decis Econ

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“…That means the simultaneous decision reduces the supplier's incentive to encroach with an online platform due to its profitable range becoming smaller. 7 For brevity, all lemmas and their detailed proofs are provided in the appendix. Proposition 4 further reveals that when the online platform's sales cost is low, the results in Proposition 1 are quite robust; they are labelled as the'win-lose' and'lose-lose' outcomes in ) for the supplier and traditional retailer.…”

Section: Proposition 4 Under the Simultaneous Settingmentioning

confidence: 99%

“…Numerous researchers [1,[7][8][9][10] have addressed supplier encroachment on the assumption that suppliers sell products through a supplier-owned direct channel, thus ignoring the role played by the online platform and its impact on the traditional retailer, online pricing strategies and profits. Moreover, it has long been recognised that supplier encroachment has strategic consequences on sustainable operations.…”

Section: Introductionmentioning

confidence: 99%

The implications of supplier encroachmentviaan online platform

chen

Yan

2022

RAIRO-Oper. Res.

Self Cite

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E-commerce provides suppliers with the flexibility to operate an online arm via a platform in addition to their pre-existing physical stores. Although such supplier encroachment is becoming increasingly prevalent in e-commerce markets, the literature on supplier encroachment traditionally assumes that suppliers sell products to consumers directly and argues that supplier encroachment can mitigate double marginalisation problems that can secure Pareto improvements. This paper narrows this gap by investigating the implications of the supplier encroachment with an online platform under two scenarios (i.e., the platform owner forgoing or retaining its entry options). A central result obtained is that, unlike supplier-owned direct channels and in addition to the ‘win-win’ outcomes for the supplier and the traditional retailer, supplier encroachment with an online platform may also lead to ‘win-lose’ and ‘lose-lose’ outcomes. Furthermore, when the platform owner retains its entry option, such encroachment is always detrimental for the traditional retailer but beneficial for the supplier.

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“…Changa (2021) emphasised that the warranty policy can increase the customers' confidence leaving them increasingly willing to purchase remanufactured products. In this connection, there are different types of warranty policies to be proposed by Evaluation of remanufactured products manufacturers can be found in extant literature (Ben Mabrouk and Chelbi, 2022;Ullah et al, 2021;Chai et al, 2021;Changa, 2021). These warranty policies are addressed based on the length of warranty period, sales price of a product and time to failure of a component and/or part as discussed in prior studies.…”

Section: Decision Support System For Product Return Managementmentioning

confidence: 99%

A decision support system to evaluate the quality and warranty policies for remanufactured products

Kuik

Ban

Diong

et al. 2022

TQM

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PurposeThis paper proposes optimisation models to evaluate and examine the selling of extended warranty policies in terms of improved profits in producing/marketing remanufactured products. These models are numerically solved using a quadratic programming solution approach and implemented in the decision support system (DSS).Design/methodology/approachThe purpose of this paper is to develop the optimisation models for a DSS and evaluate different warranty policies for buyers.FindingsThis study has demonstrated the flexibility and usefulness of a model-driven DSS for the quality and warranty management, which is applied to examine and evaluate different configurations (i.e. component reuse, rebuild and recycle) for remanufactured products and propose the selling of extended warranty policies for buyers.Research limitations/implicationsThe developed model-driven DSS can assist manufacturers to select and increase the number of components, e.g. to be reused, rebuilt, and recycled for producing a remanufactured product and propose suitable warranty policies for buyers. However, this study focusses only on the evaluation of warranty policies for specific remanufactured products in a DSS, i.e. types of air compressors for production operations in manufacturing industry.Originality/valueThis study developed optimisation models to be used in a DSS for proposing the selling of extended warranty of a remanufactured product to improve customer satisfaction and maximise the gained profits for manufacturers.

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Should a retailer sell its own extended warranties or resell those from the manufacturer when confronting supplier encroachment?

Cited by 14 publications

References 33 publications

Optimal maintenance service outsourcing strategy considering extended warranty service

Optimal maintenance service outsourcing strategy considering extended warranty service

The implications of supplier encroachmentviaan online platform

A decision support system to evaluate the quality and warranty policies for remanufactured products

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