Supplier Encroachment and Quality Disclosure Strategy in an E-supply Chain with Blockchain Technology

Abstract

This paper explores quality disclosure strategy in an e-supply chain including a supplier and an e-retailer driven by blockchain technology (BT), wherein the supplier possesses private quality information and has the option to encroach on the end market. We investigate the no-encroachment and encroachment scenarios under the three quality disclosure strategies (i.e., non-disclosure strategy, voluntary disclosure strategy and BT-supported disclosure strategy). The impact of supplier encroachment and firms’ preference for disclosure strategies are examined. The analysis shows that regardless of the strategy chosen, encroachment always benefits the supplier but, under certain conditions, benefits the e-retailer. Interestingly, with no-encroachment, both the supplier and the e-retailer have the same preference for disclosure strategies. With encroachment, however, the supplier prefers the voluntary disclosure strategy when both the quality variability and direct selling cost are small, and BT’s operation cost is relatively large; otherwise, he prefers the BT-supported disclosure strategy. For the e-retailer, she always prefers both the voluntary and BT-supported disclosure strategies. Additionally, it is observed that the BT-supported disclosure strategy emerges as optimal for both the supplier and the e-retailer when faced with significant quality variability, regardless of encroachment. Encroachment and adopting BT can generate more consumer surplus under certain conditions. Finally, we extend the basic model by considering simultaneous quantity decision and find that keying findings are robustness. Afterwards, management insights are covered and given.

Keywords

Supply chain management / encroachment / blockchain technology / quality disclosure