Improve Supply Chain Coordination Research Articles

Who carries strategic inventory? Manufacturer or retailer

AbstractIt is widely accepted that the retailer's use of strategic inventory can mitigate double marginalization and improve supply chain coordination. However, the recent literature of channel coordination only considers the effects of the retailer's strategic inventory, leaving the manufacturer's incentive to hold strategic inventory mostly unexplored. In reality, there are situations where the manufacturer's inventory can be observed or inferred by the retailer and hence affects the vertical interaction. In our two‐period dynamic model, we show that the manufacturer in equilibrium may carry a positive amount of inventory, which yields a significant impact on the equilibrium decisions and the supply chain players' profits. Specifically, we find that the manufacturer's use of strategic inventory commits a lower propensity to resume production in the second period, thereby encouraging the retailer to carry more strategic inventory at a higher wholesale price in the first period. The manufacturer's use of strategic inventory always hurts the retailer's profit but may enhance channel profit, consumer surplus, and social welfare. Moreover, we show that the manufacturer can earn an even higher profit by directly committing to no replenishment in the second period, observed in industries with longer production lead time and higher production setup costs.

Centralized or Decentralized Transfer Prices: A Behavioral Approach for Improving Supply Chain Coordination

Problem definition: We study supply chain coordination in a setting with transshipment. We use centralized and decentralized transfer prices as a way to increase supply chain coordination. Academic/practical relevance: The ability to transship can improve channel efficiency by improving the match between supply and demand. We study how human decision makers behave in this setting and provide clear insights to improve coordination. Methodology: We use controlled laboratory experiments with financially incentivized human subjects. We study a broad set of critical ratios under both decentralized and centralized transfer-price settings. In the decentralized transfer-price setting, retailers negotiate a transfer price. In the centralized transfer-price setting, we use two different approaches: theoretical and behavioral transfer price. Both approaches suggest opposite recommendations. Results: Analytically, the optimal transfer price should depend on the critical ratio; but results from the decentralized setting show that participants set prices as if they ignore the critical ratio and instead focus on splitting potential profit from transshipped units in half. However, there is a positive relationship between transfer prices and ordering decisions. Moreover, generalizing the pull-to-center effect, we find that subjects do not place orders that coordinate the supply chain. For the centralized setting, we find that using the theoretical approach does not coordinate ordering decisions and does not improve decisions compared with the decentralized setting. The behavioral approach suggests a transfer price close to product selling price for a high critical ratio and a transfer price below product cost for a low critical ratio. These recommendations lead to coordinating ordering decisions. Managerial implications: We draw two practical conclusions from our research. First, transshipments are unambiguously beneficial, resulting in higher profitability, and, when feasible, should be encouraged. Second, when possible, transfer prices should be set centrally but taking into account subjects’ behavior. Otherwise, price negotiation might lead to better performance.

External diffusion of B2B e-procurement and firm financial performance: role of information transparency and supply chain coordination

PurposeThe purpose of this paper is to understand the process through which external diffusion of business-to-business (B2B) e-procurement impacts firm performance. The research model has been developed to empirically examine the role of information transparency and supply chain coordination in improving the firm financial performance by external diffusion of e-procurement.Design/methodology/approachThe survey is conducted in India with a target population of purchasing professionals working on the B2B e-procurement platform. The measurement model was first tested by using confirmatory factor analysis for reliability and validity, then structural equation modeling (SEM) was used to test the hypotheses of the research model using AMOS 22. The phantom model approach has been used for testing multiple mediators.FindingsThe result of the study highlights the importance of information transparency and supply chain coordination in enhancing the firm financial performance by external diffusion of e-procurement. The results establish the role of information transparency in enhancing firm performance by improving supply chain coordination. The results also indicate that supply chain coordination mediates the relationship between external diffusion of e-procurement and firm financial performance.Originality/valueThis is the first study that has focused on the external diffusion of e-procurement and its impact on firm performance. Also, this study attempted to understand the process through which external diffusion of e-procurement impacts the firm financial performance.

A framework for traceability of hides for improved supply chain coordination

Hides are an important co-product of the meat processing industry which are further used in leather production. However, there is a lack of automated traceability systems in this industry. A traceability system can improve data capture and information exchange between the stakeholders of a hide supply chain which can further improve supply chain coordination. Such a system can be used to provide important feedback to the producers about handling practices on the farm as well as provide relevant product information to the customers. A traceability system for the Norwegian hides supply chain is proposed in this paper. Various data capture technologies including RFID, dot peening and laser engraving were tested in a pilot setting. Pilot tests showed that traceability from the farm to the hide processor is possible using the RFID enabled hide tags up to the tanning process. If the machine-readable requirement is not necessary, laser engraving can be used for traceability covering the entire supply chain including the tanning process. Costs and benefits of proposed technologies are presented. Security concerns related to the use of RFID tags are also discussed.

A transshipment model for logistics management at Indian Oil Corporation

Three refineries of the Indian Oil Corporation procure crude oil from suppliers, at production sites in the Persian Gulf, West Africa, North Africa, West Asia, and India. The crude oil is shipped to two ports in the state of Gujarat, India, by large tankers and medium sized vessels. From these two ports, the crude oil is pumped to the refineriesviapipelines. The refineries have known capacity, that are different for the two types of crude oil. In this paper, the scaled-up problem has been modelled, as a transshipment network. Next, the concrete instance of the problem, has been solved using an LP solver. This was followed by post-optimality analysis of the solution. The flow values on all arcs, and optimal product mix, validate actual decisions. Precise shipping requirements obtained from the solution, are shared in advance with marine transporters to improve supply chain coordination.

Supply Chain Structure, Corporate Governance, and Market Competition in Related Party Transactions

This paper examines how supply chain coordination between the two related parties — a parent firm and its subsidiary firms — is affected by its supply chain structure, corporate governance, and market competition. We hypothesize that, under the supply chain structure of upstream subsidiary-downstream parent, the parent's CEO is more willing to deviate from the coordinated decisions, i.e., operational diversion, compared to that of the opposite structure of upstream parent-downstream subsidiary. To test our hypothesis, we analyze a unique dataset on related party transactions of 541 Korean multinational firms in manufacturing, wholesale, and retail industries from 2006 to 2013. We use the adoption of IFRS (International Financial Reporting Standards) in 2011 as a quasi-natural experiment on the effect of operational diversion in related party transactions and support our hypothesis using difference-in-differences analysis. This study provides evidence that the supply chain structure can serve as a useful corporate governance mechanism for improving supply chain coordination and that governance quality becomes more critical when a parent firm is in downstream rather than upstream. In addition, we show that the supply chain structure of upstream parent-downstream subsidiary acts as a self-regulating mechanism that can restrain the operational diversion even under weak governance quality and weak market competition.

Supply chain solutions to improve the distribution of antiretroviral drugs (ARVs) to clinics in rural areas: A case study of the QwaQwa district

This article serves as a case study based on research that was performed in the QwaQwa district in the Free State Province where the distribution of ARVs to the regional Manapo hospital, as well as between the hospital and its peripheral clinics, was interrupted and inconsistent due to problems in the supply chain. An unreliable and interrupted ARV supply chain creates the risk of virus reactivation and eventual patient mortality.The objectives of the study were to explore the problems experienced with the ARV distribution practices at the Manapo hospital, and to recommend ways in which the distribution of ARVs can be improved so that patients can receive an uninterrupted supply. The nature of the topic researched dictated the use of mainly the quantitative research method.The main problems identified include: Wrong and no uniform practice of ordering stock by the hospital and the clinics; lack of reliable, structured transportation from the depot to the hospital; as well as poor inventory management and poor overall communication. Recommendations to address the problems include: Implementing a supply chain planning and design process; improving inventory management and warehousing practices; implementing more effective and reliable distribution and transportation processes; as well as improving supply chain coordination and overall communication.

Manoeuvring through difficult terrain: How local traders link pastoralists to markets

Trade in livestock is the major source of income for pastoralists, traders, brokers, transporters and other actors in pastoral meat supply chains. Projects to ‘link pastoralists to markets’ in rural northern Kenya, place an emphasis on pastoral producers without adequate understanding of other inter-related actors whose activities and relations make up the connection to primary, secondary, regional and terminal markets. In this article, sheep and goat supply chains originating in Marsabit South are analyzed as a human activity system composed of the actions of supply chain actors and shaped by the relations between them. The geographically confined areas from which local markets receive the supply of sheep and goats are conceptualized as a “producer catchment area” depicted as finely branched tributaries through which livestock are moved towards terminal markets. A stakeholder analysis resulted in the identification of six categories of local traders who connect with other actors in both local and long distance supply chains to sustain the movement of sheep and goats to markets. The categories of traders are distinguished by different demands in travel, labour, working capital, risk exposures, and relations with other actors. In order to deal with variable and uncertain supply, local traders harness their social relations with other actors in the supply chain. However, local traders are at the highest risk for loss due to fluctuations in demand at the terminal market, as they depend on market information through brokers and lack relations to clients at the terminal market. This research demonstrates how systematic analysis of activities performed by actors, the interconnected activities linking them, and their relationships can offer insight for improved supply chain coordination.

Pareto Improving Supply Chain Coordination Under a Money-Back Guarantee Service Program

Money-back guarantee (MBG) is a well-known service offered by many retailers. Under the MBG policy, a purchased item by a consumer can be returned for a full refund. In this paper, we explore a supply chain (SC) system comprising of one retailer, which offers the money-back guarantee policy and faces a stochastic demand. With a given supply contract offered by the supplier, the retailer makes decisions on the order quantity and the market coverage of the money-back guarantee service. With reference to real-world practices, we examine three models, namely, (1) the traditional wholesale pricing model without the buyback contract, (2) the model with a buyback contract (between the supplier and the retailer) for unsold items, and (3) a dual-buyback (DB) contract model for both unsold and consumer returned items. We find that using the buyback contract alone for unsold items cannot achieve Pareto improving supply chain coordination, whereas the DB contract can. Numerical findings also indicate that the DB contract can lead to an expansion of the money-back guarantee service program to cover more customers. This paper’s findings support the implementation of the DB contract, which is commonly seen in the industry, for efficient supply chain management in the presence of the money-back guarantee service program.

Supply chain solutions to improve the distribution of antiretroviral drugs (ARVs) to clinics in rural areas: A case study of the QwaQwa district

This article serves as a case study based on research that was performed in the QwaQwa district in the Free State Province where the distribution of ARVs to the regional Manapo hospital, as well as between the hospital and its peripheral clinics, was interrupted and inconsistent due to problems in the supply chain. An unreliable and interrupted ARV supply chain creates the risk of virus reactivation and eventual patient mortality.The objectives of the study were to explore the problems experienced with the ARV distribution practices at the Manapo hospital, and to recommend ways in which the distribution of ARVs can be improved so that patients can receive an uninterrupted supply. The nature of the topic researched dictated the use of mainly the quantitative research method.The main problems identified include: Wrong and no uniform practice of ordering stock by the hospital and the clinics; lack of reliable, structured transportation from the depot to the hospital; as well as poor inventory management and poor overall communication. Recommendations to address the problems include: Implementing a supply chain planning and design process; improving inventory management and warehousing practices; implementing more effective and reliable distribution and transportation processes; as well as improving supply chain coordination and overall communication.

Integration of Six Sigma and ISM to improve Supply Chain Coordination – A conceptual framework

To achieve competitiveness and to improve supply chain performance, supply chain coordination (SCC) is considered as a key challenge by the companies to satisfy their customers. In today’s turbulent economic environment, SCC is a topic of great significance among business houses because SCC creates understanding, molds human behavior and improve competitiveness. As observed from literature that the dynamics of global market has resulted in serious pressure and distraction to activities of various supply chain entities i.e. suppliers, manufacturer, distributors, wholesaler, retailers and customers, which ultimately affects the SC performance. Thus, supply chains are exposed to risks due to uncertain and turbulent economic environment. To overcome these challenges, authors in this study developed a conceptual framework for knowledge management based on Six Sigma and ISM which can be used to study various supply chain dimensions be it human, process or quality dimensions. The main advantage of this framework is that it not only helps to understand information regarding the strength and weaknesses of various supply chain entities in a supply chain but also helps to determine the structural relationship among key dimensions of interest. The proposed framework can be applied by industries to model and analyze their processes effectively, compare their performance both within and outside their industry segment and thus improve competitiveness by following knowledge management practices.

Double moral hazard in a supply chain with consumer learning

When an innovative product is introduced into the market, consumers are often uncertain about the product value. Over time they may learn the value of product. This paper studies the impact of consumer learning on the firms' marketing efforts and revenue sharing strategies in a supply chain that sells an innovative product to consumers over multiple periods. Both the supplier and the retailer can exert marketing efforts to influence consumers' beliefs about the product and improve the product demand. Because the supplier and the retailer are independent entities with self-interested objectives, double moral hazard exists in the supply chain. We find that the supplier and retailer exert more marketing efforts in the presence of consumer learning but the marketing efforts decrease as consumers learn more about the product. We also examine the revenue-sharing strategies and find that supplier shares more revenue to the retailer when they cooperate for a longer time horizon. The total profit of the supply chain may be higher when there is information asymmetry between the supplier and retailer. This finding suggests that information sharing is not always beneficial to improve supply chain coordination.

Environmental Supply Chain Cooperation and Its Effect on the Circular Economy Practice-Performance Relationship Among Chinese Manufacturers

Due to resource scarcity and environmental degradation, a new development concept emphasizing environmental concerns, called the circular economy (CE), has been enacted in legislation in China. This environmental management concept can be implemented at three levels, namely, region, industrial zone, and individual enterprise, with the objective of boosting economic development while lessening environmental and resource challenges. Environmental supply chain cooperation (ESCC), an approach that utilizes customer and supplier cooperation in environmental management, has been initiated among Chinese enterprises. Using survey data collected from 396 Chinese manufacturers, we examine the role of ESCC practices in influencing the relationship between implementing CE practices and the achievement of performance outcomes by testing the moderation and mediation effects of ESCC practices on the CE practice-performance relationship through hierarchical regression analysis. Our data analyses indicate that ESCC practices are useful by moderation and, in some cases, essential by mediation, for Chinese manufacturers seeking to realize the performance targets desired in CE practices. The results highlight the need for Chinese manufacturers to improve supply chain coordination in their implementation of CE. On the policy side, our research findings suggest that ESCC practices are beneficial and, in some cases, necessary for the development of CE in China.

Electronic integration in the apparel industry: the Charles Vögele case

PurposeThe purpose of this paper is to analyze a case where electronic date interchange implementation has been successful and to distill the main reasons for this success and understand how the actors involved dealt with the main inhibiting factors suggested by the information systems management literature.Design/methodology/approachThe aim of the paper being explorative and partially confirmatory, an “information rich” case was selected to generate new knowledge and review the extant literature on EDI adoption's antecedents and consequences.FindingsWhereas some suggestions from the literature were confirmed, others are to be reviewed. The main findings are the following: managerial commitment, technological readiness (both of the systems themselves as of employees) and unclear return on investment are the main inhibitors of EDI adoption. One inhibiting factor that, to the authors' knowledge, has not received enough attention in the literature is the fear of data disclosure. The main benefits are not a mere reduction in administrative costs by improved supply coordination and exceptions management. Finally, the personal relationship between participants is the most important for the success of an implementation.Practical implicationsThis case can be of value for vertically (relationally) integrated companies that aim to improve supply chain coordination through electronic integration in the apparel, but also in other, industries.Originality/valueTo the authors' knowledge there has not been any study yet analyzing EDI implementation in vertically integrated companies in the apparel industry so far. Also the authors feel that an in‐depth single case study considerably adds to the knowledge of the phenomenon in question because of the possibility of envisaging the relevance of contextual factors.

Unlocking the Value of RFID

RFID (Radio‐Frequency Identification) technology has shown itself to be a promising technology to track movements of goods in a supply chain. As such, it can give unprecedented visibility to the supply chain. Such visibility can save labor cost, improve supply chain coordination, reduce inventory and increase product availability. Industry reports and white papers are now filled with estimates and proclamations of the benefits and quantified values of RFID. Early adopters are now rallying more and more followers. However, most such claims are educated guesses at best and are not substantiated, that is, they are not based on detailed, model‐based analysis. This paper argues that there is a huge credibility gap of the value of RFID, and that a void exists in showing how the proclaimed values are arrived at, and how those values can be realized. The paper shows that this credibility gap must be filled with solid model analysis, and therefore presents a great opportunity for the Production and Operations Management (POM) research community. The paper reviews some of the ongoing research efforts that attempt to close the credibility gap, and suggests additional directions for further strengthening the POM's contribution to help industry realize the full potentials of RFID.

A Generalized Framework for Quantity Discount Pricing Schedules

ABSTRACTThe use of price to influence a buyer's purchasing behavior and thus improve supply chain coordination has received considerable attention. The vendor and buyer are independent economic entities, each maximizing its own profit. We consider the case of a buyer with fixed annual demand, independent of cost. The vendor's objective is to set a price schedule that encourages the buyer to raise its order quantity, increasing the vendor's profits. We present a unified treatment of the problem, categorize different variations, and provide a common solution procedure for all cases.

An integrated supplier-buyer model for improving supply chain coordination

This study develops a decision support model that can be used by a supplier in making production and price decisions at contract renewal times in a supply chain environment. The supplier first makes aggregate production decisions with a special attempt to estimate buyer commitments, and then determines the price of the item so as to satisfy his own profit and buyer cost reduction expectations simultaneously. Mathematical programming models are designed to achieve these in accordance with the contract terms. The main emphasis is placed upon the conceptual and negotiation aspects of the models, and some solution procedures are cited from previous studies. Then the approach is implemented in the biggest electric motor manufacturer in Turkey which has a large number of buyers in household appliances sector, and it is shown to be a useful tool for developing fair partnership.

A feasibility study on the development of an integrated manufacturing planning and control system in the South African Sawmill Industry

A feasibility study was conducted to assess the potential application of an integrated manufacturing planning and control (MPC) system within the South African sawmill industry. Implementation of such a system could enhance the international competitiveness of the sawmill industry through improved supply chain co-ordination. Potential benefits include higher turnover, lower manufacturing cost and improved customer service. Profit improvements of between 2–7% on turnover have been reported from commercial applications internationally.