Strategic Waiting for Disruption Forecasts in Cross-Border E-Commerce Operations

Abstract

Motivated by dual sales channel operations in cross-border e-commerce, we analyze an e-tailer's strategic waiting decision for channel disruption information in a global supply chain. The e-tailer operates two sales channels: a bonded-warehouse channel with products prestocked before channel disruption for demand fulfillment; and a direct-shipping channel with products delivered directly from an overseas supplier. The direct-shipping channel is exposed to disruption risk that might be caused by extreme weather events. Forecasts about the disruption are accurate, and the e-tailer has the option of waiting for disruption forecasts and postponing order decisions in the bonded-warehouse channel. We find that the e-tailer is better off waiting if the direct-shipping channel is either much more or much less important than the bonded-warehouse channel. By waiting, the e-tailer has the flexibility to adjust the stock in the bonded-warehouse channel (depending on whether the direct-shipping channel will be disrupted), enhancing channel coordination. However, anticipating the e-tailer's improved channel coordination, the supplier might increase wholesale prices to extract more profits from the e-tailer. If the direct-shipping channel is highly important, waiting brings a significant benefit from channel coordination, offsetting the cost increase in the bonded-warehouse channel. If the direct-shipping channel is much less important, this channel provides the e-tailer with leverage against the supplier in wholesale pricing; the e-tailer waits strategically for sourcing cost reduction. This paper emphasizes the role of strategic waiting for disruption information and signifies the importance of considering horizontal channel coordination and vertical interaction along supply chains.