Impact of Competing Supply Chains

Thus far, we have focused on alternate performance metrics and associated supply chain architecture. Now we will consider the impact of competitors who independently make decisions to maximize their performance. The presence of competitors may often benefit individual customers but may also decrease the profitability of supply chain entities. A key concept is that competing supply chains generate equilibrium results, in which each supply chain makes decisions independently, anticipating but not knowing decisions by competitors. There are several ways that supply chains affect the competing choices and performance of a given supply chain. 

For example, the presence of competing retailers offers a customer the choice of visiting the competition if one retailer is out of stock. In anticipation of such spillover customers, as well as the increased options for their own customers, retailers can adjust their inventory. An individual retailers supply chain choice is an equilibrium response to competing retailers choices. 

In other words, competing retailers offer the customer the option to take advantage of many possible pools of capacity, as we will discuss in Chapter 4 on capacity. We described competitive effects on service level in this section, but the same idea can be considered for any metric in the supply chain. 

---