Logistics Service Supply Chain Vertical Integration Decisions under Service Efficiency Competition

Abstract

In the logistics sector, price competition is no longer the only form of horizontal competition between logistics service integrators; instead, it frequently takes the form of service efficiency competition among chains. Facing fierce market competition, vertical resource integration gradually becomes the trend in logistics industry integration. Using the inverse derivation method and comparative analysis, this study examines the relationship between the overall profit of its chain and that of the rival chain under service efficiency competition with or without the integration strategy. Furthermore, it builds two parallel competition logistics service supply chain models based on the inter-chain Nash competition and Stackelberg game of the chain members. The study results demonstrate that when the cost per unit of service efficiency is fixed, the greater the intensity of competition between chains, the more managers should tend to choose an integration strategy to maximize their profits. More interestingly, we find that the optimal integration decision of the supply chain is independent of the competitive intensity when the cost required to improve the unit service efficiency is extremely high.