A Framework for Cigarette Supply Chain in the Monopoly Environment

Abstract

As a big tax resource, cigarette industry brings about 10% of China’s annual income. Similar with that in other industry, the supply chain in cigarette industry also consists of a supplying network, a kernel manufacturer and a distribution network. The supplying network concerns with tobacco suppliers, e.g. tobacco planters, cigarette complement material suppliers and cigarette machine suppliers. The cigarette manufacturers, i.e. a cigarette factory or tobacco group takes the role of the kernel manufacturer. The distribution network involves cigarette companies (wholesalers) and retailers. Due to the local finance is separated from the central finance while the cigarette monopoly management is the responsibility of the local cigarette companies, the distribution network has a strong characteristics of zone-specific and thus is easy to be broken. Meanwhile, as the center of the whole supply chain, the kernel manufacturer is not allowed to build a nation-wide, self-owned distribution network in the market. Therefore, the imperfectness of the monopolistic distribution network could only be made up by the manufacturer’s decentralized manufacturing network and distributionstrengthen network, both of which cross multiple supply chain notes.