Sub-Coordination in a Competing Supply Chain With a 3PL Provider

Coordinating contracts are sometimes difficult to be established because of information sharing constraints and additional administrative burdens. Considering the difficulties of coordinating contracts, it is reasonable that coordination between only some of chain members will be easier to achieve than coordination of the whole supply chain. For convenience, coordination between only some of chain members is referred to sub-coordination. This paper discusses three types of sub-coordination in a competing supply chain comprising two manufacturers, a retailer, and a 3PL provider. Using the fully decentralized supply chain as a benchmark, the effects of sub-coordination on the supply chain are investigated. We find out that sub-coordination is not always effective to improve the profit of the supply chain, in some cases sub-coordination even does harm to supply chain members or the whole supply chain. The performance of sub-coordination critically depends on the degree of product substitutability.