Cost savings have consistently been the important issue in the supply chain management. By reducing expenses, the players in a chain can increase profits quickly.
Instead of cutting price for competing market share with red ocean strategy, the players in creative and cultural industry should seek to cut down cost as well as increase additional value at the same time with blue ocean strategy to increase competitive advantage. To minimize waste cost which results from duplication of resources, sharing and using products and services on an as-needed basis instead of owning them helps to increase the operation efficiency in the whole supply chain. That’s the reason why for perfect storm of sharing economy which response validly to social and environmental challenges dominated by internet.
Since internet, network infrastructure of information, plays the main role of promotor of sharing economy, it motivates development of information sharing, the key of innovative industries these days. Therefore, the Internet has contributed to both increasing needs and opportunities for improved supply chain management (Lee, 2015).
Information sharing, a coordinated effort between manufactures (M), logistics service providers (L), retailers (R), and moreover, platform (P), in e-commerce edge, increases transparency as well as transaction integrity, and reduce risk in price competition as well as information searching cost for operation. Through exchange of information, it helps innovative business models to emerge, expand the industry boundary as well as realize economic scale.
In conventional Taiwan’s cultural creative industry, people usually regard cultural products as high art whose target market segment is professional art collectors. To promote Taiwan’s culture with cultural and creative products to the public and even the whole world, we hope that we can increase market penetration rate by applying O2O
(online-to-offline), one of the most popular business models that intrigues lots of interests, to integrate the virtual and real channel for competition in the electronic commerce (EC) world.
The key of the innovative model, O2O platform, with a website or mobile app that acts as a middleman between physical stores and internet users to transmit funds or data over the Internet, is to attract online users and direct them to physical stores in the offline realm. It is a combination of payment model and foot traffic generator for merchants and also creates offline purchases (Kang et al., 2015). Instead of selling souvenir directly to customers through traditional channel in a supply chain which does not share demand information, we are in pursuit of an innovative supply chain, where the manufacture, retailers and logistics service provider can cooperate with a business, who serves as an O2O platform to take over the responsibility of point of sale (POS) data from end customers, who place orders through virtual channel, as well as inventory levels, and sell products to customers for increasing in-store sales. Hence, in order to achieve supply chain efficacy, each channel member is expected to pay attention to cost savings and profit enlarging by collaborating on supply chain integration.
In this paper, we aim to find out how O2O business models can influence supply chain in an efficient way by information sharing. As the core of information flow system, virtual platform plays the role of congregating demand data as well as liaison of upstream supplier, downstream retailers and logistics provider. Therefore, we would like to know that under the structure of O2O business model, where the platform is necessary, how platform interacts with other players to maximize the allocation of cost savings in the whole supply chain, how information sharing is conducted in different coalitions, which coalitions bring more profits and maximize cost savings and what mechanism could distribute allocation of cost savings brought by coalitional schemes in an unique and efficient way to motivate and stabilize participants in coalitions.
We explored the implications of game theory as a context for providing useful insights into the cooperative strategic decisions in our model. Firstly, we tried to indicate all the possible coalitions in O2O model, inclusive of virtual platform, to define the feasible number of paths of information flow and calculate every player’s cost savings in different situation. The analysis helped to discover the influence of participation of players. Secondly, we calculate characteristic functions to find out all conditions in coalitions to ensure feasibility of cooperative mechanism and stability of every coalition.
To take an in-depth look into what the best ways are to approach decisions when there are multiple decision makers, each of them with different information, motives, and goals, we applied Shapley value to a four-player game. A solution concept that applies the Shapley value to cooperative games can calibrate empirical estimates of demand among coalition structures of multi-players that have significant power in prediction most of the time. Yet, in the practice, some infeasible coalitions shouldn’t be counted. Thus, we apply Banzhaf index to complete our analysis of distribution of cost allocation.
Finally, we discuss the boundary conditions of our results as well as the implications for managerial and policy issues to enhance the market share and sales revenue of products so that consumers actively make purchases rather than passive purchase behaviors.
This paper is organized as follows. In §3, we present a model of an O2O business model supply chain with four-level players. By analyzing the retailer’s, the logistics service provider, and the manufacturer’s ordering decisions based on demand data exchanged through platform, we develop different coalitions with different information-transmission pathway to simulate real situations of information flow for
the benefits (cost savings) of information sharing in different coalitions, and we try to determine which coalitions or players have significant impacts on the benefits of information sharing in characteristic form. After we get characteristic values, in §4, we present some conditions for cooperation in the four-level system to ensure the stability and feasibility of coalitions. On the other hand, we use Shapley value and Banzahf index to distribute cost allocations to stakeholders in the system to get a unique balance and reach maximum efficiency. In §5, we use some numerical results to prove the efficacy of the model on the benefit of information sharing. Also, we present and examine the impact of the demand process on the benefits of information sharing. The paper ends with a discussion.