Choice For Manufacturing Research Articles

Manufacturer's choice of online selling format in a dual-channel supply chain with green products

When selling green products on online platforms, manufacturers often have to choose their selling format between agency selling and reselling. This paper focuses on a green manufacturer selling substitutable products through an e-commerce platform (also known as an e-tailer) and an independent offline retailer. Our research makes a major contribution by examining how the manufacturer makes joint decisions on green product development, pricing, and the online selling format. Our analytical results show that, first, in the case of a low agency fee, agency selling leads to a greener product on the online channel, which benefits the manufacturer. Otherwise, reselling improves the product greenness on both channels, which benefits the manufacturer. More notably, higher consumer green awareness incentivizes the manufacturer to prefer agency selling. Second, counterintuitively, it is found that agency selling can be more profitable for the e-tailer when the agency fee is low and moderate, and vice versa. This is because a high agency fee will depress the manufacturer's online sales of green products, hurting the e-tailer. Finally, we extend our model to the cases with different marginal demand expansion parameters, different greenness-enhancing cost factors, a leading e-tailer, the simultaneous use of both formats, and different channel competition coefficients on the price and product greenness. We demonstrate the robustness of our main analytical results and obtain more managerial insights.

Developing a store brand or collecting a commission: Amazon's choice and quality decision

AbstractAmazon, as one of the dominant online retailers (platforms), cooperates with manufacturers under wholesale contract to develop its store brands. Simultaneously, Amazon offers manufacturers with a marketplace and serves manufacturers in the agency selling. In this paper, we build a model to investigate the platform's and the manufacturer's choices on the cooperation modes (i.e., wholesale contract or agency selling) and their quality decisions when they serve consumers with heterogeneous willingness to pay for quality and the platform can dictate the quality under the wholesale contract. We find that the platform and the manufacturer are more likely to align their preferences on selling modes when consumers are homogenous enough. Moreover, when the commission rate is relatively low, both of them may prefer the agency selling. In this case, the manufacturer is willing to offer high quality in the agency selling. In contrast, when the commission rate is sufficiently high, they can only align their preferences on selling modes by choosing the wholesale contract. The product quality under the wholesale contract is higher than that in the agency selling. Finally, we provide three extensions: the platform decides the commission rate, the platform decides the wholesale price and competition between manufacturers.

Consumer rebate strategy for a manufacturer selling price‐quality differentiated products

AbstractIn this study, we consider a scenario where a manufacturer offers two price‐quality differentiated products, which we label “regular” and “upgraded,” through a retailer and uses direct rebates to customers to stimulate sales. Therefore, the critical question posed is: If a customer rebate is provided, should it be on the regular, upgraded, or both products? Consequently, we compare the outcomes of eight options from a manufacturer's perspective. The analysis reveals that the manufacturer's choice is not straightforward. Rebates on both products can lead to higher profit for the manufacturer if the proportion of rebate‐sensitive consumers is moderate. However, product quality becomes critical as the proportion of rebate‐sensitive consumers increases. If the quality of the regular product is too high or too low, then the manufacturer may use a rebate only on the regular product; otherwise, it should be on only an upgraded product. The rebate value on an upgraded product continuously decreases with regular product quality if a rebate is introduced only on an upgraded product, but its nature changes in other contexts. Quality improvement investment is also a critical factor that affects the manufacturer's decision. Because an analytical assessment of the effectiveness of rebate promotion under the price‐quality consideration is still missing in the literature, the decision to initiate a rebate promotion might be considered on an ad hoc basis. Therefore, the explicit thresholds identified in this study can help managers to make rebate decisions comprehensively.

Manufacturer encroachment with an e‐commerce division

Traditionally, manufacturer encroachment is investigated under an integrated organizational structure where online business decisions are made at the whole firm level. However, with the establishment of a specific e‐commerce division, the manufacturer has the flexibility to delegate the decision‐making of the online business to its e‐commerce division to maximize the online revenue under a decentralized structure. We study manufacturer encroachment in a supply chain, where a manufacturer sells through a bricks‐and‐mortar retailer and plans to deploy its e‐commerce division to launch the online direct‐to‐consumer business. Different from prior research, we endogenize the manufacturer's choice between the integrated and the decentralized structures in its encroachment pursuit. Our results suggest that the decentralized structure could enlarge the manufacturer's feasible range to encroach, but it would also intensify the competition between the e‐commerce division and the retailer. Therefore, choosing the decentralized structure does not necessarily yield a higher profit for the manufacturer because the loss in the retail channel may be hard to offset due to the intensified competition. Instead, choosing the integrated structure could lead to a win–win–win outcome for the manufacturer, retailer, and e‐commerce division when the direct selling cost is sufficiently low. Although the manufacturer may benefit from encroachment under both organizational structures, it should not encroach when the direct selling cost is between low and moderate. Notably, the bright side of manufacturer encroachment's impact on the retailer still exists under the decentralized structure. We also study some alternative settings, including consumers’ offline hassle cost, market‐based transfer price, and quantity competition, to obtain additional insights.

Quantity-based or share-based? Discount schemes for the manufacturer when facing two competing retailers

PurposeThe authors investigate the manufacturer's choice of discount schemes in a supply chain with competing retailers.Design/methodology/approachUsing a game-theoretic model, the authors build two discount frameworks and compare and analyze the effects of different discount schemes on the performance of supply chain members.FindingsThe authors find that the retail price (market demand) in the quantity discount scheme is always higher (lower) than that in the market share discount scheme. The authors also find that the retailers' preference for discount schemes is antithetical to the manufacturer's preference in most cases. However, under certain conditions, there will be a win-win situation where Pareto-optimization occurs between the manufacturer and retailers when they choose the same discount scheme.Research limitations/implicationsOn the one hand, the authors assume that the two retailers are symmetrical in market size and operation efficiency. It would be interesting to study the effect of different discount schemes on retailers when the retailers have different market sizes or operating efficiency. On the other hand, the authors study the manufacturer's choice of discount schemes in a supply chain with one common manufacturer and two competing retailers. However, in practice, there exist other supply chain structures. Future research can examine the problem of choices of discount schemes in other different supply chain structures.Practical implicationsThis paper help retailers and manufacturers to choose the best discount schemes.Social implicationsThis paper suggests that a high discount scale is not always beneficial (detrimental) to retailers (the manufacture).Originality/valueThe authors build two discount schemes (the quantity and the market share) in a supply chain consisting of one manufacturer and two retailers, and the authors focus on the effects of different discount schemes on the competition between two retailers. By comparing the two discount schemes, the authors study which discount scheme is the better choice for the manufacturer when facing competing retailers.

Rent, sell, and remanufacture: The manufacturer's choice when remanufacturing can be outsourced

Manufacturers have increasingly started offering rental options for the products they sell. Renting products offers an opportunity: segmenting consumers. However, this also raises a challenge: what to do with the returned products? One solution is to remanufacture these products and then rent or resell them. Subsequently, should remanufacturing be outsourced to a third-party firm that can remanufacture at a lower cost? Here, we use a multi-period setting and examine the optimal decisions for different selling and renting constellations. Importantly, we allow the manufacturing costs of the sales and rental products to differ, as they seem to be critical in determining the manufacturer's renting and selling decisions and remanufacturing strategies. For example, under integrated (i.e. in-house) remanufacturing, when the new rental product's manufacturing cost is sufficiently high, no remanufacturing happens. Under both remanufacturing strategies—integrated and outsourced—the manufacturer does not rent new products in the second period if the manufacturing costs of the sales and rental products are identical. If the rental product's manufacturing cost is either sufficiently low or high, then integrated remanufacturing is more profitable; when this manufacturing cost is within a moderate range, the manufacturer outsources remanufacturing to an independent remanufacturer. Surprisingly, in some situations, the production quantity of the new sales product may even increase with its manufacturing cost. This is because the manufacturer may extract an even higher margin compared with the new rental product. Finally, we also consider several extensions such as uncertainty regarding the quality of the returned goods, simultaneous selling and renting of remanufactured goods, and longer horizons and the product's life cycle.

Количественный анализ рынка фотоаппаратов на основе комплексного применения теоретико-игрового и эконометрического подходов

This article contains a quantitative analysis of the camera market and discloses the possibilities of comprehensive application of quantitative analysis and theoretical game modeling in the practice of making decisions in the field of the photo industry. It is noted that almost any phenomenon in the financial and economic sphere requires a thorough and comprehensive assessment, and the method of analyzing data in the form of dynamic series and theoretical and game models is most in demand in the conditions of actualization of risks of various nature. It is shown that the analysis of the dynamic series allows you to evaluate and predict the development of the economic situation, to form recommendations for making managerial decisions. Particular attention is paid to the construction and analysis of the basic game model of the manufacturer's choice of camera equipment for the time of launch of products to the market, taking into account projected demand. The inclusion of the risk factor in the process of quantitative analysis of the camera market helps to improve the quality of decisions made, in particular when choosing marketing strategies.

Outsourcing strategy in the presence of the customer returns

In this paper, we examine a manufacturer's choice of outsourcing contractor, either a competing contractor or a non-competing contractor. Both the manufacturer and the competing contractor (which also produces a product in its own brand) face customer returns. We find that the manufacturer's optimal outsourcing strategy depends strongly on two factors: the efficiency of production and sale of its brand relative to that of the competing contractor in its own brand, and the ratio of the qualities of the two brands. The competing contractor, on the other hand, always prefers to produce for the manufacturer. Interestingly, we find that when the manufacturer chooses to outsource to the non-competing contractor, both the wholesale and retail prices of the manufacturer's product decrease, while they increase if the competing contractor is chosen. In addition, the competing contractor may be chosen even if it charges a higher wholesale price than the non-competing contractor does. We find that the manufacturer and the competing contractor should offer money-back guarantees if they can efficiently recover value from any returns. We further show that when a non-competing contractor is chosen, money-back guarantees offered by the manufacturer and the competing contractor can benefit at least one firm and may even achieve a win-win situation. When the competing contractor is chosen, both the manufacturer and the competing contractor can either benefit (Pareto improvement) or suffer (prisoner's dilemma) from money-back guarantees. These results are different from those in existing studies in the literature.

Supply chain finance schemes in the procurement of agricultural products

Product, information, and finance flows are all interrelated within the modern supply chain; thus, it is now more than ever of paramount importance for practitioners to integrate procurement and financial decisions. This challenge is exemplified in many agricultural supply chains, where operational risks are significant and access to capital differs sharply across firms. We study three management tactics that some large food/beverage manufacturers – situated downstream in these chains – have used to meet the challenge: ordinary fixed price contracts (or soft tolling) with direct suppliers, hard tolling and contract farming where the manufacturer intervenes upstream, providing capital, and coordinating procurement decisions. We place these upstream intervention schemes in the theoretical context of supply chain finance (SCF) and model their application to a three-echelon agricultural supply chain. We perform a numerical study in order to understand how the structure of capital constraints in the chain may influence the manufacturer's choice of SCF scheme. The numerical study is based on a business case that reflects the barley–malt supply chain of Heineken N.V. Despite greater coordination opportunities, we show that upstream intervention is not necessarily preferable for the manufacturer. Nevertheless, the preferred SCF scheme can be inferred on the basis of relatively simple characterization of the capital constraints in the supply chain.

Supply Side Effects of Pollution Tax Rate Asymmetries

We investigate the effects of asymmetric per-unit pollution tax rates in two countries on a firm's choice of location for its manufacturing facilities, local and global environmental damage, and social welfare. The novelty of our approach is that we consider a manufacturer which offers products on multiple separated markets and that these products need the same inputs that have to be purchased from common suppliers. Accounting for the interaction between the supply side and the firm's location strategy, we show that establishing production facilities in an environmentally stringent region might be optimal for the manufacturer despite the higher pollution tax. Additionally, an increase in the pollution tax in one country does not necessarily decrease the total profit of a multinational manufacturer. We also demonstrate that a unilateral increase in the pollution tax rate to reduce emissions can actually lead to an increase in local and also global environmental damage. Since the multinational manufacturer's choice of organizational design accounts for the interactions with its vertical channel, our finding supports the conclusion that neglecting supply side interactions when determining emission tax rates might have unintended consequences.

Supply Disruption and Reactive Strategies in an Assemble-to-Order Supply Chain With Time-Sensitive Demand

This paper addresses the comparison and selection decision of reactive strategies for supply disruption management. We consider an assemble-to-order supply chain with one manufacturer who employs a single-sourcing strategy for each kind of component. The manufacturer assembles products for customers using components purchased from the suppliers in a just-in-time environment. Demand for the products is time-sensitive. We propose and compare three pure reactive strategies and two dynamic reactive policies for managing supply disruption. In the pure reactive strategies, only one kind of strategy is adopted during the disruption. But strategies adopted in the dynamic pure reactive policies change with the passage of time during the disruption. In the dynamic mixed strategy with customer choices, the manufacturer can use both backup source to offer on-time delivery and compensation policy to compensate customers for waiting in each period during the disruption. We find that the backup sourcing strategy is preferred at the beginning of the supply disruption, while the compensation strategy is preferred as time elapses. The dynamic pure strategy is superior to any other pure reactive strategies. The dynamic mixed strategy with customer choices is superior to the pure backup sourcing strategy. The backup cost and customer sensitivity are two determining factors in the manufacturer's choice of the reactive strategies.

A learning and knowledge approach to sustainable operations

Manufacturing's choice of environmental technologies is expected to be partly driven by the organizational context and receptivity to new ideas and innovation. More specifically, we hypothesize that the organizational learning and knowledge system of a manufacturing plant tends to favor the adoption of pollution prevention technologies and environmental management systems over pollution control technologies of that plant. The organizational learning and knowledge system is hypothesized to be split in two different stages, organizational learning antecedents and organizational learning processes. The choice of environmental technologies is hypothesized to be partially related to the organizational learning antecedents, and mediated by the organizational learning processes. Survey data exploring these relationships are presented from a sample of manufacturing plants in Canada. We found that the actual trade-off is not only between pollution prevention and pollution control, but also between pollution prevention and environmental management systems. The plant's social climate and external knowledge exchange are positively related to pollution control, while the stock of knowledge of managers, stock of knowledge of workers, and internal knowledge exchange are negatively related to pollution control. Environmental management systems had the opposite results. These results are counterintuitive, since we expected that all constructs from organizational learning culture would contribute to the choice of pollution prevention and environmental management systems. We found, however, no empirical support for the mediated model, and the organizational learning and knowledge system explained very little variance in the choice for pollution control. Our study makes three significant contributions. First, it explains, at least in part, the linkages between the stock of employee knowledge, knowledge exchange and managerial choices of environmental technologies in manufacturing. Second, it refined and validated scales that capture organizational knowledge within operations. Finally, this research highlighted the important role that plant-level social climate has on fostering a greater emphasis on pollution prevention. The managerial implications of this research are twofold. Managers, in order to promote pollution prevention and creating long term value with this kind of technology, should promote both the social climate and the external knowledge exchange in the plant. Managers also should craft their environmental management systems not as a bureaucratic process of documentation and regulatory compliance, or just to fulfill clients’ or parent company requirements, but as a source of process improvement and innovation.

Threshold incentives over multiple periods and the sales hockey stick phenomenon

AbstractIn this article, we study threshold‐based sales‐force incentives and their impact on a dealer's optimal effort. A phenomenon, observed in practice, is that the dealer exerts a large effort toward the end of the incentive period to boost sales and reach the threshold to make additional profits. In the literature, the resulting last‐period sales spike is sometimes called the hockey stick phenomenon (HSP). In this article, we show that the manufacturer's choice of the incentive parameters and the underlying demand uncertainty affect the dealer's optimal effort choice. This results in the sales HSP over multiple time periods even when there is a cost associated with waiting. We then show that, by linking the threshold to a correlated market signal, the HSP can be regulated. We also characterize the variance of the total sales across all the periods and demonstrate conditions under the sales variance can be reduced. © 2010 Wiley Periodicals, Inc. Naval Research Logistics, 2010

Comparative Advertising and In-Store Displays

Manufacturers often have a choice of whether to advertise something positive about their own products without mentioning their rivals' products (a noncomparative ad) or whether to portray their rivals negatively in addition to promoting their own products (a comparative ad). In this paper we ask: First, if a manufacturer in a distribution channel can choose between a comparative ad and a noncomparative ad, all else being equal, which should it choose? Second, under what conditions would a manufacturer want to reinforce its advertising message at the point of sale with in-store displays, and when should the retailer allow the displays? Third, how does the possibility of in-store displays influence the manufacturer's choice of ad content? We find that a manufacturer will prefer to run comparative ads over noncomparative ads for advertising that is untargeted or that appeals primarily to the manufacturer's core consumers, and run noncomparative ads over comparative ads for advertising that appeals primarily to the rival's core consumers. We also find that in-store displays will be optimal for the manufacturer and its retailers if and only if they increase the overall joint profit of the retailer, the manufacturer, and its rival. Finally, we find that the possibility of offering in-store displays increases a manufacturer's incentive to run noncomparative ads. However, some comparative ads may be so attractive to the manufacturer that it will run them with or without retailer help. Our paper is the first to introduce a channel-based explanation for why manufacturers may or may not want to engage in comparative advertising.

Commitment decisions with partial information updating

AbstractIn this paper, we extend the results of Ferguson M. Naval Research Logistics 50, 2003, 917–936. on an end‐product manufacturer's choice of when to commit to an order quantity from its parts supplier. During the supplier's lead‐time, information arrives about end‐product demand. This information reduces some of the forecast uncertainty. While the supplier must choose its production quantity of parts based on the original forecast, the manufacturer can wait to place its order from the supplier after observing the information update. We find that a manufacturer is sometimes better off with a contract requiring an early commitment to its order quantity, before the supplier commits resources. On the other hand, the supplier sometimes prefers a delayed commitment. The preferences depend upon the amount of demand uncertainty resolved by the information as well as which member of the supply chain sets the exchange price. We also show conditions where demand information updating is detrimental to both the manufacturer and the supplier. © 2005 Wiley Periodicals, Inc. Naval Research Logistics, 2005

OPTIMAL ORDERING IN A DUAL‐SUPPLIER SYSTEM WITH DEMAND FORECAST UPDATES

We study how an updated demand forecast affects a manufacturer's choice in ordering raw materials. With demand forecast updates, we develop a model where raw materials are ordered from two suppliers—one fast but expensive and the other cheap but slow—and further provide an explicit solution to the resulting dynamic optimization problem. Under some mild conditions, we demonstrate that the cost function is convex and twice‐differentiable with respect to order quantity. With this model, we are able to evaluate the benefit of demand information updating which leads to the identification of directions for further improvement. We further demonstrate that the model applies to multiple‐period problems provided that some demand regularity conditions are satisfied. Data collected from a manufacturer support the structure and conclusion of the model. Although the model is described in the context of in‐bound logistics, it can be applied to production and out‐bound logistics decisions as well.

Price discounts or coupon promotions: does it matter?

This article shows that in a model of exogenously given sales expansion target with a dominant manufacturer, the relative profitability of coupon and price-reduction schemes depends on the values of coupon redemption rates and the equivalence ratio of price reduction to coupon face value. It is also shown that retailer's margin has an uncertain impact on the compensation constraint on the manufacturer's choice between the two schemes. However, higher retailer's margin increases the likelihood that the chosen sales expansion scheme (SES) is the one that generates higher consumer welfare. A sales response model is used to estimate the equivalence ratio and critical coupon redemption rate below which the manufacturer will prefer a coupon promotion. A sensitivity analysis of the manufacturer's decision reveals that changes in the magnitude of the retailer's margin have little impact on the manufacturer's choice between alternative SESs.

Resale Price Maintenance or Dealer Exclusive Territories? Toward a Theory of Product Distribution

A theory of product distribution is presented by examining a manufacturer's choice between resale price maintenance (RPM) and dealer exclusive territories to solve the standard retail free riding problem. The choice depends critically on the life cycle of the product being distributed: manufacturers of products with long life cycles are more likely to distribute their products with exclusive territories, with RPM becoming more probable as the life cycle of the product shrinks. These results provide a link between a product's characteristics and the likely manner in which it is offered at retail.

The choice between resale price maintenance and exclusive territories: Evidence from litigation

A manufacturer's choice between resale price maintenance (RPM) and exclusive territories to protect dealer provided services is examined empirically. The relative efficacy of RPM in solving the free rider problem depends on the life cycle of the product being distributed. A manufacturer of a product with a long life cycle is more likely to protect its dealers' investment in service with exclusive territories, whereas RPM becomes the more probable restraint for products of short life spans. Data gleaned from vertical restraint litigation strongly support this hypothesis.

Determinants of Marketing Channel Choice: Extent of Demand, Differential Costs and Entry Threats

Concerning the task of marketing, a manufacturing firm can choose either to use a trading firm or to market the product itself. The purpose of this paper is to explore the effect of learning-by-doing of marketing on the manufacturer's choice of its marketing channel, and on the sustainability of its monopoly position with the choice channel. The relationship between learning-by-doing and market structure has begun to be discussed recently. The division of labor between manufacturing and marketing can be considered a vertical integration problem. There have not been attempts to put them together and ask the question as posed in this paper. This deficiency could be due to institutional differences between the U.S. and Japan. The importance of independent traders in the U.S. declined as large manufacturing firms emerged on the scene and took over their own marketing [1]. The division of labor between manufacturing and marketing has been quite different in Japan. Each intermarket group has, at its center, a giant general trading company (GTC), sogo-shosha, to handle trade for its members.' However, the relationship between the GTC and manufacturing firms is by no means mutually exclusive, and has been changing over time. This changing relationship is what this paper tries to explain. This paper assumes this unique presence of the GTC, which offers the manufacturing firm an alternative to marketing the product on its own. Moreover, the marketing technology is assumed to differ for the GTC and the manufacturer. That is, the GTC enjoys economies of scale and scope while the manufacturer benefits from learning as it does its own marketing. Justifications for this assumption follow [3, 48-50; 9, 140-44; 10, 118-22]. GTC's scale economies arise from the fact that trading activities of different industries have some common characteristics, and the GTC sometimes handles trade for different firms in the same industry. Specifically, the GTC enjoys economies of scale in providing financing, insurance, warehouring and transportation, in keeping branch offices all over the world, in gathering