Strategic Waiting for Disruption Forecast 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 pre-stocked 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. Forecast about the disruption is accurate and the e-tailer has the option of waiting for disruption forecast and postponing the order decision in the bonded-warehouse channel. We find that the e-tailer is better off by waiting if the direct-shipping channel is either more or less important compared to the bonded-warehouse channel. We identify two effects for elaboration: channel-coordination effect and unit-cost effect. 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 (channel-coordination effect). However, anticipating the e-tailer's improved channel coordination, the supplier might raise the wholesale price to extract more profit from the e-tailer (unit-cost effect). We show how the interactions of these two effects shape the e-tailer's strategic waiting decision. We also show the robustness of the main results in extended models by considering demand spillover and transshipment across channels, product substitutability, and imperfect disruption forecast.

Keywords: strategic waiting, disruption forecast, cross-border e-commerce, global supply chain management