We examine the service competition in a product replenishment system and in a service delivery system. To excel the competitors in the competition, a supplier needs to understand the impact of her decision on the market share, and make the best decision considering the possible actions and reactions of the competitors. In a product replenishment system with multiple suppliers, customer reaction to a stockout is either accepting the delayed delivery (backorder, usually with some incentive) or taking the order elsewhere (lost sales). When customers take the sec-ond action, the suppliers suffer not only a loss of sales but also a loss of goodwill. In this thesis, we present two availability competition models for this problem: (1) dynamic competition model, and (2) attraction model. In the...[ Read more ]

We examine the service competition in a product replenishment system and in a service delivery system. To excel the competitors in the competition, a supplier needs to understand the impact of her decision on the market share, and make the best decision considering the possible actions and reactions of the competitors. In a product replenishment system with multiple suppliers, customer reaction to a stockout is either accepting the delayed delivery (backorder, usually with some incentive) or taking the order elsewhere (lost sales). When customers take the sec-ond action, the suppliers suffer not only a loss of sales but also a loss of goodwill. In this thesis, we present two availability competition models for this problem: (1) dynamic competition model, and (2) attraction model. In the dynamic model, we consider the problem with two suppliers in a multi-period setting, and assume that a proportion of unsatisfied customers will switch supplier in the next period. We show the existence and uniqueness of Nash equilibrium, and prove that the dynamic game will converge to a stationary game. In the attraction model, we consider the problem with multiple suppliers in the long run. We assume that the fill rate is a key dimension of the product. We show the existence, uniqueness of Nash equilibrium, and discuss how the firm behavior is affected by the competi-tion. In a service delivery system, the supplier needs to quote a uniform delivery time for customers, while the quality of service, measured by the probability of on time delivery, must meet the market requirement. Both the lead time quotation and the service quality affect the attraction of the supplier, and hence the supplier needs to make suitable time decision to balance these two dimensions. We derive the optimal decision for the suppliers and provide some managerial insights. In particular, we show that whether a supplier should adopt an endogenous or ex-ogenous service quality, or whether she should make the decision based on her own parameters or based on the market requirement, depends on the capacities of the competing suppliers.