Big data service outsourcing and cost-sharing choices for the manufacturer

Abstract

The proliferation of digital technologies has revolutionized various industries, prompting enterprises to prioritize investment in big data analytics. Despite the associated value, enterprises must carefully assess the cost proposition of such investment. This study models a supply chain with a manufacturer and a retailer, investigating big data investment decisions and strategies of manufacturer as leader across varying scenarios. The results show that: if the manufacturer focus only on the big data service level, it will choose not to outsource. In the case of non-outsourcing, the pre-production big data service level, the pre-sale big data service level and the retailer’s profit are higher, however, the manufacturer’s profit depends on fixed cost. Moreover, the manufacturer has three options: it chooses non-outsourcing if the profits of supply chain members are decreased, it chooses outsourcing without coordination mechanism if only considers maximizing own profit, it chooses outsourcing with coordination mechanism if considers the profits of other members. If outsourcing is considered, the manufacturer can decide its cost-sharing rate according to different situations. When consumers need products with high satisfaction, they will improve the big data service level. And, the increased price is also acceptable to consumers. When consumers pay more attention to low price, appropriately reducing the big data service level can also satisfy consumers. In addition, this paper provides some management inspirations for decision-making and operation of supply chain.