Digital Technology for Delivery Strategies in a Supply Chain: Platform's Expansion With Value-Added Processing Centers

E-commerce platforms adopt differentiated delivery strategies for various products, where the application and investment of digital technologies play a vital role in shaping delivery services. We consider a hybrid product market in which the platform sells standard products and competes with manufacturers of augmented products that require value-added processing, such as engraving or printing. The platform may provide only basic delivery services for augmented products while applying digital technologies to enhance the delivery of standard products. Alternatively, it may establish value-added processing centers to support a unified delivery strategy and adjust its digital investment accordingly. Counterintuitively, our analysis shows that even when product value and service fees are high, the platform may still refrain from establishing value-added processing centers. Moreover, the adoption of these centers can stimulate further digital investment and enhance coordination, benefiting manufacturers through improved delivery and wider market reach. While customer surplus may decline due to weakened competition, overall welfare can increase through better alignment of processing and delivery decisions. We further demonstrate the robustness of these findings through two model extensions (i.e., asymmetric processing costs and heterogeneous product valuation) as well as numerical verification of the analytical results. This study contributes to the engineering management literature by explaining how platforms align digital technology investment with the establishment of value-added processing centers and how this alignment reshapes delivery strategy, platform-manufacturer interaction, and market outcomes. —