Power Structure and Profitability in Assembly Supply Chains

This paper studies the impact of supply chain power structure on firms' profitability in an assembly system with one assembler and two suppliers. Two power regimes are investigated—in a Single Power Regime, a more powerful firm acts as the Stackelberg leader to decide the wholesale price but not the quantity whereas in a Dual Power Regime, both the price and quantity decisions are granted to the more powerful firm. Tallying the power positions of the three firms, for each power regime we study three power structures and investigate the system's as well as the firms' preference of power. We find that when the assembler is the most powerful firm among the three, the system‐wide profit is the highest and so is the assembler's profit. The more interesting finding is that, if the assembler is not the most powerful player in the system, more power does not necessarily guarantee her a higher profit. Similarly, a supplier's profit can also decrease with the power he has. These results contrast with the conclusion for serial systems, where a firm always prefers more power. We also find that when both suppliers are more (less) powerful than the assembler, it can be beneficial (indifferent) for everyone if the two suppliers merge into a mega supplier to make decisions jointly. When the assembler is more powerful than one supplier and less so than the other, it is always better for the system to have the two suppliers merge, and for each individual firm, merging is preferred if the firm becomes the more powerful party after merging.     

Organizing the Global Value Chain

We develop a property‐rights model of the firm in which production entails a continuum of uniquely sequenced stages. In each stage, a final‐good producer contracts with a distinct supplier for the procurement of a customized stage‐specific component. Our model yields a sharp characterization for the optimal allocation of ownership rights along the value chain. We show that the incentive to integrate suppliers varies systematically with the relative position (upstream versus downstream) at which the supplier enters the production line. Furthermore, the nature of the relationship between integration and “downstreamness” depends crucially on the elasticity of demand faced by the final‐good producer. Our model readily accommodates various sources of asymmetry across final‐good producers and across suppliers within a production line, and we show how it can be taken to the data with international trade statistics. Combining data from the U.S. Census Bureau's Related Party Trade database and estimates of U.S. import demand elasticities from Broda and Weinstein (2006), we find empirical evidence broadly supportive of our key predictions. In the process, we develop two novel measures of the average position of an industry in the value chain, which we construct using U.S. Input–Output Tables.     

Sourcing Decisions with Stochastic Supplier Reliability and Stochastic Demand

Supplier sourcing strategies are a crucial factor driving supply chain success. In this paper, we investigate the implications of uncertain supplier reliability on a firm's sourcing decisions in an environment with stochastic demand. In particular, we characterize specific conditions under which a firm should choose a single versus multiple supplier sourcing strategy. In an environment with both uncertain demand and supply, we characterize the total order quantity, the number of suppliers selected for order placement, and the allocation of the total order quantity among these selected suppliers. For deeper managerial insight, we also examine the sensitivity of the optimal sourcing decisions to interactions between uncertainties in product demand and supply reliability. We show that sourcing from a single supplier is an optimal strategy for environments characterized by high levels of demand uncertainty or high salvage values. A numerical analysis based on data obtained from an office products retailer further reinforces our analytical results. In addition, we also find that when minimal order quantities are imposed, there are situations where it is not optimal to place an order with the lowest cost supplier.     

Supply Chain Sourcing Under Asymmetric Information

We study a supply chain with two suppliers competing over a contract to supply components to a manufacturer. One of the suppliers is a big company for whom the manufacturer's business constitutes a small part of his business. The other supplier is a small company for whom the manufacturer's business constitutes a large portion of his business. We analyze the problem from the perspective of the big supplier and address the following questions: What is the optimal contracting strategy that the big supplier should follow? How does the information about the small supplier's production cost affect the profits and contracting decision? How does the existence of the small supplier affect profits? By studying various information scenarios regarding the small supplier's and the manufacturer's production cost, we show, for example, that the big supplier benefits when the small supplier keeps its production cost private. We quantify the value of information for the big supplier and the manufacturer. We also quantify the cost (value) of the alternative‐sourcing option for the big supplier (the manufacturer). We determine when an alternative‐sourcing option has more impact on profits than information. We conclude with extensions and numerical examples to shed light on how system parameters affect this supply chain.     

Managing Engineering Design for Competitive Sourcing in Closed‐Loop Supply Chains

We examine the strategic interplay between a buyer's design decision and the ensuing competition between suppliers in a three‐tier closed‐loop supply chain setting with significant recycling considerations. The nature of the engineering design decision in our research entails choice of integral versus modular design that has direct implications for the input raw material waste and ensuing competition between suppliers (i.e., incumbent and new). Whereas the integral design requires a large blank and generates excessive material scrap, the modular design reduces the generated scrap, and enhances cut‐to‐fit modularity, but incurs joining cost and yield loss. The incumbent supplier who supports the status quo choice of integral design can effectively recycle excessive material waste, as it is strategically located close to the source of material. The engineering design team at our study firm is currently exploring the option to source from alternative suppliers that can support either integral or modular designs, but have significantly lower effectiveness in recycling scrap material. We characterize the buyer's price sensitivity levels, component characteristics, supply chain configurations, and virgin and scrap specialty material prices that yield various design and sourcing policy alternatives. The buyer's optimal policy choice, the ensuing price–demand dynamics, and the resulting recycling implications demonstrate that the buyer can benefit from strategically tailoring his design decisions to affect the suppliers' material requirements and costs. We show that utilizing an alternative supply option is particularly valuable for components made from a material with a low price differential in virgin and scrap forms in supply chains wherein the new supplier base can recycle effectively. In such cases, the buyer induces severe price competition by dual sourcing the integral design, and competition may negate the seemingly obvious benefits of operational improvements (e.g., higher scrap material return rate).      

Supply chain management: a supplier perspective

A new way of researching into supply chain management is introduced by adopting a supplier perspective. Details are given of mixed integer linear planning and simulation models. The planning model takes into consideration firm and forecast orders (customer's forecast purchasing orders) and the behaviour of the supplier's suppliers and suppliers' subcontractors. The simulation model takes into account the dynamic behaviour of the supply chain and includes the planning production behaviour of a supplying company based on the planning model. The supplier manager can use the simulation model to determine what kind of parameters most affect company performances and then propose new management rules. Quantitative results that prove the benefits of integrating forecast orders for an aeronautic supplier have been provided.     

供应链视角下的多方并购框架

以并购参与方所在供应链为研究视角,探讨了买方与多个供应商并购分析框架。首先,得出多种框架下并购前后各方所获利润,并数值模拟供应链环境变化对买方利润的影响;其次,在比较基础上给出供应链各方互动下的均衡。结果表明,并购交易的实施和供应链各方互动共同影响并购各方和其余各方所获利润,且互动削弱了并购产生的正向协同效应。本文给出了供应链各方互动下的并购分析框架,进一步完善了并购决策过程中的交易评估内容。     

Intensity of Interaction in Supply of Business Advice and Client Impact: A Comparison of Consultancy,Business Associations and Government Support Initiatives for SMEs

This paper assesses the supply of business advice using new empirical evidence from a large-scale survey of SMEs. The chief focus of the paper is on a comparison of suppliers that operate in different environments of regulation, contract and reputation. The paper argues that interaction intensity varies with the level of information asymmetry of these different environments, between different types of service supplier and their clients. Interaction intensity between suppliers also varies as a result of the level of trust they enjoy: for example, the low trust enjoyed by consultants appears to encourage higher intensity of interaction which improves the tailoring of the service to the client's needs and enhances impact. The paper assesses interaction intensity using the existence of site visits and/or a written brief/contract as indicators. Although these measures have limitations, the paper demonstrates clear and significant differences between suppliers in terms of interaction intensity, use of contracts and impact in three broad categories: private-sector consultancy (low trust, high intensity, high impact), business associations (high trust, low intensity, moderate impact) and government support agencies (moderate trust, moderate to high intensity, moderate or low impact). Multivariate estimation methods demonstrate that significant differences in interaction intensity, use of contracts and impact by client type are much less important than differences in supplier type. This indicates that suppliers generally develop more into niche service fields or groups of services rather than niches related to types of firm.     

Optimal Procurement Design of an Assembly Supply Chain with Information Asymmetry

We study a decentralized assembly supply chain in which an assembler (she) assembles a set of n components, each produced by a different supplier (he), into a final product to satisfy an uncertain market demand. Each supplier holds private cost information to himself, for which the assembler only has a subjective estimate. Furthermore, the assembler believes that the suppliers' costs follow a joint discrete probability distribution. The assembler aims to design an optimal menu of contracts to maximize her own expected profit. The assembler's problem is a complex multi‐dimensional constrained optimization problem. We prove that there exists a unique optimal menu of contracts for the assembler, and we further develop an efficient algorithm with a complexity of O(n) to compute the optimal contract. In addition, we conduct a comprehensive sensitivity analysis to analyze how environmental parameters affect individual firm's performance and the value of information to the assembler, to each supplier, and to the supply chain. Our results suggest that each supplier's private cost information becomes more valuable to the assembler and each supplier when the average market demand increases or when the final product unit revenue increases. Surprisingly, when a supplier's cost volatility increases and its mean remains the same, the value of information to the assembler or to each supplier does not necessarily increase. Furthermore, we show that when the suppliers' cost distributions become more positively correlated, the suppliers are always worse off, but the assembler is better off. However, the value of information for the assembler might increase or decrease.     

Supply Contract Design for Competing Heterogeneous Suppliers under Asymmetric Information

This study considers a supply chain with two heterogeneous suppliers and a common retailer whose type is either low‐volume or high‐volume. The retailer's type is unknown to the suppliers. The flexible supplier has a high variable cost and a low fixed cost, while the efficient supplier has a low variable cost and a high fixed cost. Each supplier offers the retailer a menu of contracts. The retailer chooses the contract that maximizes its expected profit. For this setting, we characterize the equilibrium contract menus offered by the suppliers to the retailer. We find that the equilibrium contract menus depend on which supplier–retailer match can generate the highest supply chain profit and on how much information rent the supplier may need to pay. An important feature of the equilibrium contract menus is that the contract assigned to the more profitable retailer will coordinate the supply chain, while the contract assigned to the less profitable retailer may not. In addition, in some circumstances, the flexible supplier may choose not to serve the high‐volume retailer, in order to avoid excessive information rent.     

Matching Product Architecture and Supply Chain Configuration

In this paper, we examine the suggested link between product architecture (i.e., the extent to which a product is modular vs. integral) and supply chain configuration (i.e., whether the product development is done internally by the manufacturer in an integrated supply chain or in collaboration with a supplier in a decentralized supply chain). Our model suggests that the choice of product architecture depends on firm, market, and product characteristics in addition to supply chain structure. In contrast to other studies, we find that the optimal mapping from architecture to supply chain structure is not always one‐to‐one. A decentralized supply chain may be associated with a more integral product when the technical collaboration penalty is not excessive and suppliers have significantly superior product development capabilities. Furthermore, in a decentralized supply chain, the nature of the relationship between the original equipment manufacturer and its supplier (adversarial or collaborative) plays a role in the choice of product architecture: modular architectures are more likely when the parties have adversarial relationships, while long‐term trust‐based relationships facilitate more integral product architectures.     

Carrots or Sticks? Improving Social and Environmental Compliance at Suppliers Through Incentives and Penalties

Firms are increasingly looking to eradicate social and environmental non‐compliances at their suppliers in response to increasing regulations, consumer demand, potential for supply chain disruptions, and to improve their social, environmental, and economic supply chain performance. This study develops a model of the relationship between the buyer's supplier incentives and penalties for the supplier's social and environmental compliance, and the outcomes in terms of reduction in supplier social and environmental violations as well as the buyer's own operating costs. This model is tested empirically through analysis of a dataset of opinion‐based survey responses from practitioners at 334 companies across 17 industries. The analysis finds specific penalties and incentives that are positively associated with reduced supplier violations and reduced buyer operating costs. In particular, offering suppliers incentives of increased business and training for improving social and environmental performance is strongly associated with a reduction in both violations and operating costs.     

Coordinating Supply Chains via Advance‐Order Discounts,Minimum Order Quantities,and Delegations

To avoid inventory risks, manufacturers often place rush orders with suppliers only after they receive firm orders from their customers (retailers). Rush orders are costly to both parties because the supplier incurs higher production costs. We consider a situation where the supplier's production cost is reduced if the manufacturer can place some of its order in advance. In addition to the rush order contract with a pre‐established price, we examine whether the supplier should offer advance‐order discounts to encourage the manufacturer to place a portion of its order in advance, even though the manufacturer incurs some inventory risk. While the advance‐order discount contract is Pareto‐improving, our analysis shows that the discount contract cannot coordinate the supply chain. However, if the supplier imposes a pre‐specified minimum order quantity requirement as a qualifier for the manufacturer to receive the advance‐order discount, then such a combined contract can coordinate the supply chain. Furthermore, the combined contract enables the supplier to attain the first‐best solution. We also explore a delegation contract that either party could propose. Under this contract, the manufacturer delegates the ordering and salvaging activities to the supplier in return for a discounted price on all units procured. We find the delegation contract coordinates the supply chain and is Pareto‐improving. We extend our analysis to a setting where the suppliers capacity is limited for advance production but unlimited for rush orders. Our structural results obtained for the one‐supplier‐one‐manufacturer case continue to hold when we have two manufacturers.     

Impacts of buyers' order batching on the supplier's demand correlation and capacity utilization in a branching supply chain

There are several ways for a manufacturer to cope with demand uncertainty, e.g. inventories, capacity and cash. Among these, this study focuses on the second one, the capacity, especially on the problem of investing in flexible facilities and enhancing their utilization via demand management. In a supply chain, demands that an upstream firm (supplier) faces are the purchase orders from the downstream members (buyers). We analyse the impacts of buyers' order batching on the supplier's demand correlation and capacity utilization in a simple branching supply chain, where a supplier does business with two buyers whose market demands are correlated. Our results show that: (i) a supplier whofacesa smaller demand correlation coefficient (i.e. closer to-1) would invest more in flexible facilities; (ii) an increase in order lot size mitigates the correlation of purchase orders; and (iii) a supplier whose facilities are flexible would prefer frequent orders with smaller lots only when market demands are highly negatively correlated. This means that even suppliers whose facilities are flexible would rather prefer infrequent orders with larger lots in the presence of positively correlated demands. Additionally, some managerial implications are discussed.     

Dynamic Pricing and Inventory Management with Dual Suppliers of Different Lead Times and Disruption Risks

It is common for a firm to make use of multiple suppliers of different delivery lead times, reliabilities, and costs. In this study, we are concerned with the joint pricing and inventory control problem for such a firm that has a quick‐response supplier and a regular supplier that both suffer random disruptions, and faces price‐sensitive random demands. We aim at characterizing the optimal ordering and pricing policies in each period over a planning horizon, and analyzing the impacts of supply source diversification. We show that, when both suppliers are unreliable, the optimal inventory policy in each period is a reorder point policy and the optimal price is decreasing in the starting inventory level in that period. In addition, we show that having supply source diversification or higher supplier reliability increases the firm's optimal profit and lowers the optimal selling price. We also demonstrate that, with the selling price as a decision, a supplier may receive even more orders from the firm after an additional supplier is introduced. For the special case where the quick‐response supplier is perfectly reliable, we further show that the optimal inventory policy is of a base‐stock type and the optimal pricing policy is a list‐price policy with markdowns.     

考虑供应商产品交付水平的供应链融资策略研究

供应商产品的交付水平直接影响下游制造商的生产，但是这种现象没有得到供应链金融研究的重视。为此，本文将供应商交付水平和供应链的运营融资问题结合起来研究。在考虑供应商产品交付水平的情况下，通过研究资金不足的供应商分别利用制造商预付款融资和风险投资方股权融资时，供应商的最优运营决策和融资策略，最后考虑了供应商对两种融资方式的选择。研究结果表明，供应商的自有资金水平对供应链均衡决策及其收益影响很大，有限的自有资金严重制约了供应商产品的交付水平，降低了供应链的运作效率；不管是资金充足，还是选择融资，供应商的利润不仅与自身的运营效率有关系，而且与替代供应商产品的批发价格有很大关系，当供应商的运营效率较低时，供应商的利润随着替代供应商产品的批发价格先增大后减小，当供应商运营效率较高时，供应商的利润随着替代供应商产品的批发价格逐渐增大。当供应商进行融资时，若自有资金水平较低，应通过股权融资的方式进行融资，若自有资金水平较高，供应商应该选择制造商预付款的方式进行融资，若自有资金量超过预付款融资时供应商所需资金的阈值时，供应商选择不融资。     

Role of Random Capacity Risk and the Retailer in Decentralized Supply Chains with Competing Suppliers

This research considers a supply chain under the following conditions: (i) two heterogeneous suppliers are in competition, (ii) supply capacity is random and pricing is endogenous, (iii) consumer demand, with and without an intermediate retailer, is price dependent. Specifically, we examine how uncertainty in supply capacity affects optimal ordering and pricing decisions, supplier and retailer profits, and the incentives to reduce such uncertainty. When two suppliers sell through a monopolistic retailer, supply uncertainty not only affects the retailer's diversification strategy for replenishment, but also changes the suppliers’ wholesale price competition and the incentive for reducing capacity uncertainty. In this dual‐sourcing model, we show that the benefit of reducing capacity uncertainty depends on the cost heterogeneity between the suppliers. In addition, we show that a supplier does not necessarily benefit from capacity variability reduction. We contrast this incentive misalignment with findings from the single‐supplier case and a supplier‐duopoly case where both suppliers sell directly to market without the monopolistic retailer. In the latter single‐supplier and duopoly cases, we prove that the unreliable supplier always benefits from reducing capacity variability. These results highlight the role of the retailer's diversification strategy in distorting a supplier's incentive for reducing capacity uncertainty under supplier price competition.     

Enabling SMEs to take full advantage of e-business

Electronic business is rapidly changing the relationships between supply chain partners. This paper looks at what is needed to allow SMEs to participate fully in supply chain integration. First, current trends in supply chain integration, electronic commerce, and Internet support are examined. Next, the goals and results of a study are presented which addressed SME needs in fast moving consumer goods supply chains. These concepts are then integrated to determine a way forward for SMEs to participate in e-business. It is found that current Virtual Markets (web-sites or on-line communities that facilitate finding a buyer or seller and track orders) address some customer - supplier relationships but need many enhancements before they can support fully integrated supply chains.     

Global Multisourcing Strategy: The Emergence of a Supplier Portfolio in Services Offshoring

In today's global services outsourcing arena, increasing numbers of companies adopt “multisourcing,” that is, they select and combine information technology (IT) and business services from multiple providers. The literature on IT outsourcing and supply chain management has identified critical tradeoffs involved in increasing the number of suppliers and has strongly recommended focusing on a handful of strategic partners to balance these tradeoffs. Committing to a few strategic partners, however, may prevent a firm from discovering new suppliers, or even supply regions. Such missed opportunities may be particularly limiting in the context of offshoring professional services, which has exhibited rapid changes in supplier markets in the last decade. Thus, firms may want to engage in a more intensive multisourcing in services. If they do so, their success will depend on a global sourcing process that effectively addresses the critical tradeoffs involved. To explore how a global sourcing process can support multisourcing, we conducted a qualitative longitudinal case study of a large financial services institution that developed a varied global supply base to obtain offshore professional services. Our analysis results in a theory that emphasizes (i) advantages of a multiple provider strategy in rapidly changing global supply markets; (ii) the critical role of middle managers in enabling continuous innovation in the supplier structure; and (iii) the importance of the global sourcing process combining top–down and bottom–up decision making in multisourcing.     

基于讨价还价模型的持股型供应链最优订货与定价策略研究

论文分析了风险规避型供应商和制造商组成的供应链系统，为了降低供应的不确定等因素，通过制造商投资供应商并持股的方式降低供应链的整体风险。构造均值-方差模型刻画制造商和供应商的风险偏好特征，并通过构建纳什讨价还价模型分析供应商和制造商的交易谈判过程。论文证明了纳什讨价还价模型存在唯一的均衡合同，并对均衡合同进行了比较静态分析，提出了可供实践企业参考的管理启示。