Dr. Liu Naimeng, a postdoctoral fellow at the Management Science and Engineering Research Station of the Business School, has recently published her latest research paper titled “Manufacturer Encroachment with Three Flows” in the journal Naval Research Logistics. The paper is co-authored by Dr. Liu Naimeng, Dr. Zhang Cheng (Fudan University), and Dr. Yang Jie (Shanghai Maritime University). Dr. Liu serves as the corresponding author.
The study explores the complex interactions among three core cooperative flows—material flow, information flow, and capital flow—when a manufacturer encroaches into the market. Key findings include:
- Under certain conditions, the manufacturer and retailer may voluntarily terminate their traditional wholesale cooperative relationship. Whether a manufacturer chooses to encroach depends on whether its fixed cost falls below a threshold determined by three major effects: the competition effect (direct selling must drive market expansion greater than the erosion of retail channels), the information effect (enhancing profitability through information sharing to improve demand forecasting), and the financing effect (adverse pressure from interest costs).
- Facing manufacturer encroachment, the retailer is not merely passive but has two powerful countermeasures: financial deterrence by adjusting buyer financing interest rates, and, when competition intensifies, strategically terminating wholesale contracts as a material‑flow‑based countermeasure.
- Crucially, collaboration between capital flow and information flow generates a positive synergy of “1+1 > 2”, whereas the combination of material flow and information flow may produce negative cross‑effects. When channel competition is moderate, the former dominates; otherwise, the latter prevails. The robustness of these core conclusions is confirmed by analyzing different decision sequences and market models.
The study provides a novel strategic perspective for managing manufacturer encroachment: treat the “three flows” as an integrated system for coordinated management. For manufacturers, successful encroachment goes far beyond opening a new channel—the key is to carefully balance the three flows, especially by leveraging the synergy between information and capital while avoiding over‑reliance on retailer financing that might erode their initiative. For retailers, proactive defense strategies are essential—flexibly adjust buyer financing interest rates within the competitive range, or decisively terminate wholesale relationships in highly competitive markets. Ultimately, only by managing material flow, information flow, and capital flow as a holistic system can firms achieve optimal outcomes in complex channel games.
Naval Research Logistics, founded in 1954, is a prestigious international journal in management science. It is rated as a three‑star journal by the UK Association of Business Schools (ABS), classified as a TOP A‑tier journal by the Business School, and enjoys high academic impact and reputation.
Paper link: https://onlinelibrary.wiley.com/doi/10.1002/nav.70004
Translated by Gai Lin
Reviewed by Liu Weiwei, Wei Xin
