Supplier Responsiveness Research Articles

Strategic outsourcing decisions of new entrant and competing incumbent manufacturer in a supply chain with common supplier

<p style='text-indent:20px;'>We characterize outsourcing strategies and their interaction between the incumbent manufacturer and the new entrant in a supply chain with the common supplier. The incumbent manufacturer and the supplier can provide the critical components to the entrant, and we will investigate how the incumbent manufacturer competes with the new entrant and whether the common supplier can benefit from the new outsourcing. We find the incumbent benefits from the new entrant's outsourcing to a monopoly supplier, and it is rational and more profitable for the incumbent to cooperate with the new one. Then, we analyze the supplier's response to the incumbent's strategic behavior and reveal that a rational supplier would offer the incumbent a more favorable price. Counter-intuitively, the supplier may benefit if the entrant possesses more bargaining power.</p>

Competing for supply and demand: Understanding retailers' ordering decisions

Supply chains require the interaction between retailers and suppliers in a dynamic environment. One frequent and costly source of inefficiencies produced by these interactions is known as the bullwhip effect. The bullwhip effect takes place when the variability of orders increases as one moves up the supply chain. However, the impact of this variability is influenced by retailers who compete both for supply and demand. This study systematically explores the impact of the bullwhip effect when there is horizontal competition among retailers. We develop a mathematical model in a competitive system and create two behavioral studies to evaluate the effect of supplier's responsiveness, customers' overreaction, and capacity allocation on retailers' decisions. We show evidence of participants' limited ability to reduce the bullwhip effect. Our results show that competition for supply has a strong effect on participants' ordering decisions, while competition for demand does not impact how retailers inflate their orders. Furthermore, we show that by adjusting the supplier's allocation mechanism, order variability decreases in up to 50%. Our econometric model shows that (i) more complex systems increase the bullwhip effect but decrease retailers' biases, and (ii) retailers underreact to shipments received from the supplier and ignore customers' order cancellations. We provide recommendations to decrease the impact of the bullwhip effect on supply chains.

Horizontal mergers and supplier power

Supplier power, such as the ability of branded goods suppliers to dictate terms to retailers, is an important feature of many markets. We show that supplier power can counteract the effects of downstream mergers on consumer prices where there are two-part contracts. This is because greater market power allows suppliers to set contracts that internalise partially the impact of the merger on downstream prices. Post-merger, the supplier reduces the per-unit price at which it supplies the merged downstream firms, with the aim of maintaining total industry profitability. We modify the standard upward pricing pressure (UPP) formula to account for the supplier's response to a horizontal merger in the downstream market while preserving much of the simplicity of the standard approach.

A Manufacturer's New Product Preannouncement Decision and the Supplier's Response

We study a manufacturer's product preannouncement decision in a setting where there is uncertainty about when an innovative new product design will be finalized for production, and a key component supplier needs to reserve the capacity before the realization of the final product design. The marketing literature has shown that product preannouncement changes the product demand: it may create buzz about the new product so the demand increases; or it may induce stronger competition from rivals so the demand decreases. We characterize the supplier's optimal response in reserving capacity given the uncertainty in the product design timing and the changing demand. Furthermore, we characterize the conditions under which the manufacturer may benefit from preannouncing her product release date. We show that even when preannouncement leads to a shorter sales window of the product, the manufacturer may still be better off in preannouncing her new product release date because the supplier's response of reserving the capacity earlier improves the manufacturer's profit. For a similar reason, we find that the manufacturer's expected profit may increase in the wholesale price that she pays to the supplier for the key component. In addition, we show that the supplier trusts the manufacturer's preannounced product release date only when this date is sufficiently late; otherwise, he ignores the preannounced product release date. Finally, we demonstrate that the supplier reserves less capacity, but reserves earlier when the competitive response is stronger, the market potential is smaller, and the sales window is shorter.

Demand Postponement with Strategic Service Customers

We study capacity decisions in a service environment with seasonal arrival rates and strategic customers. Due to seasonality, the firm uses a postponement strategy where compensation is given to the peak-time customers who cannot be served in the peak time and agree to delay service. We extend the analysis of demand postponement to the case with strategic customers, i.e., off-peak customers who may pretend to be peak-time customers purely to receive the postponement discount. Focusing on the capacity and discount decisions for the service provider, we develop a game-theoretic model to study when the service provider should consider using a postponement strategy in the presence of strategic customers. At the first stage, the service provider decides on the capacity level and discount. At the second stage, strategic customers decide whether to show up in the peak time. We find that strategic customers exhibit a follow-the-crowd type of behavior. Unsurprisingly, we find that the presence of strategic customers does not benefit the service provider. More interestingly, we find that the presence of strategic customers may benefit the peak-time customers, unlike the inventory literature with strategic (arrival-timing) customers, in which the supplier's response is usually detrimental to non-strategic customers. In the presence of strategic customers, the supplier needs to offer a lower discount or build more capacity than without strategic customers. If the supplier does not have control over the discount value, she might need to build excess capacity to prevent the strategic customers from showing up in the peak time.

A new supply chain network design approach, regarding retailer's inventory level and supplier's response time

This paper deals with the retailer's location problem, when inventory costs for retailers and response time costs for suppliers have been considered. Generally, in a supply chain, most of the parameters are not deterministic, for this reason, we considered demand and service time as stochastic parameters, and queuing theory has been used to prepare a comprehensive mathematical model. In this system, each supplier has been represented with an M/M/1 queue and each retailer has been represented with an M/M/1 queue with bulk arrival. Due to the computational complexity of the proposed model, a genetic algorithm has been proposed to obtain acceptable solutions in a reasonable time. Further, performance of the proposed (GA) is compared against LINGO package software for small-sized problems. Our computational results suggest that the proposed GA is able to solve our mathematical model, especially for large sizes. To evaluate performance of the model, a real example of dairy supply chains has been prepared, which confirmed efficiency of the model.

A new supply chain network design approach, regarding retailer's inventory level and supplier's response time

This paper deals with the retailer's location problem, when inventory costs for retailers and response time costs for suppliers have been considered. Generally, in a supply chain, most of the parameters are not deterministic, for this reason, we considered demand and service time as stochastic parameters, and queuing theory has been used to prepare a comprehensive mathematical model. In this system, each supplier has been represented with an M/M/1 queue and each retailer has been represented with an M/M/1 queue with bulk arrival. Due to the computational complexity of the proposed model, a genetic algorithm has been proposed to obtain acceptable solutions in a reasonable time. Further, performance of the proposed (GA) is compared against LINGO package software for small-sized problems. Our computational results suggest that the proposed GA is able to solve our mathematical model, especially for large sizes. To evaluate performance of the model, a real example of dairy supply chains has been prepared, which confirmed efficiency of the model.

A predictive analytic approach to determine construction cost estimates

In the construction industry, cost estimates are the basis for which projects are awarded to suppliers. A cost estimate is arguably the most important inclusion in a supplier's response to a customer's 'request for quote'. As such, it is essential for construction cost estimates to include features of accuracy, cost effectiveness and profitability for the supplier. The amount of variables and qualitative considerations in an estimate require a methodology beyond an objective approach. This paper uses data analytics to analyse both a US Government service provider's internal estimate process and suppliers' external estimate process to determine the best approach to use on future task orders. Three different classifier methods were used to perform the data analytic approach. Based on analyses performed for all three methods, RBF-based support vector machine with a 66%–33% random split and ten-fold cross-validation yielded the highest accuracy at 71%.

Impact of Operational Systems on Supplier's Response Under Performance-based Contracts

Abstract Performance-based contract has developed into a new service strategy in after-market operations that aims to compensate for performance outcomes. One of the key components of a performance-based contract is performance measure that is affected by factors such as base stock, reliability and response time. To achieve a desired performance level, the supplier has to improve the component reliability and the repair time. The component reliability in a repairable part inventory system is a function of the number of operational systems and the service capacity. In this research, we consider a single echelon repairable part inventory system and conduct a parametric analysis to evaluate the impact of the total number of systems on the supplier's decisions under a performance contract. The results show that the numbers of systems plays a key role on the supplier's response when the customer uses the average number of backorders as the negative incentive.

Study on the Responsiveness of Production Load-Equilibrium Based Order Allocation Strategy

For industry cluster with multiple suppliers and multiple manufacturers, there exist a network of supply and demand relationship among suppliers and manufacturers. By using the balanced production load among suppliers as the main criteria for decision making, an order allocation model for supply chain with multi-suppliers vs. multi-manufacturers based on production load equilibrium-based strategy is proposed in this paper. In the end of paper the discrete event system simulation is used to verify that the production load equilibrium-based strategy can enhance the supplier's responsiveness effectively，which further leads to a satisfied OTD of manufacturers and the optimization of the whole supply chain.

Determinants of knowledge transfer in inter‐firm new product development projects

PurposeThe purpose of this paper is to explore the factors which determine the degree of knowledge transfer in inter‐firm new product development (NPD) projects. The authors test a theoretical model exploring how inter‐firm knowledge transfer is enabled or hindered by a buyer's learning intent, the degree of supplier protectiveness, inter‐firm knowledge ambiguity, and absorptive capacity.Design/methodology/approachA sample of 153 R&D intensive manufacturing firms in the UK automotive, aerospace, pharmaceutical, electrical, chemical, and general manufacturing industries was used to test the framework. To analyse the data, two‐step structural equation modeling in AMOS 7.0 was used.FindingsThe results indicate that a buyer's learning intent increases inter‐firm knowledge transfer, but also acts as an incentive for suppliers to protect their knowledge. Such defensive measures increase the degree of inter‐firm knowledge ambiguity, encouraging buyer firms to invest in absorptive capacity as a means to interpret supplier knowledge, but also increase the degree of knowledge transfer.Practical implicationsThe paper illustrates the effects of focusing on acquisition, rather than accessing supplier technological knowledge. The paper shows that an overt learning strategy can be detrimental to knowledge transfer between buyer‐supplier, as suppliers react by restricting the flow of information. Organisations are encouraged to consider this dynamic when engaging in multi‐organisational, NPD projects.Originality/valueThe paper examines the dynamics of knowledge transfer within inter‐firm NPD projects, showing how transfer is influenced by the buyer firm's learning intention, supplier's response, characteristics of the relationship and knowledge to be transferred.

Explaining Supplier Behavior on Global Account Management

Using globalization and contingency theory, this paper develops a supplier-based model of global account management (GAM). The model comprises the multinational supplier's industry globalization drivers, the multinational customers' extent of globally coordinated buying, such customers' demand for GAM services, the supplier's response in terms of using various aspects of GAM, and resulting possible improvement in the supplier's performance. The paper develops six hypotheses linking these variables. Data on various aspects of these variables were collected in a survey of 191 executives in multinational companies. Two related models are estimated from these data using a structural equations method. The results support the argument that the supplier's industry globalization drivers play a key role in affecting customers' demand for GAM services, and that supplier's implementation of GAM leads to significant performance improvements.

A supplier's response to IDR

AbstractThis paper discusses the evolutionary development of the IDR series of modem products from 1986 to the present. User‐friendly features are stressed. Market forces and the availability of complex custom VLSI logic shape the design of the high performance modem products of the future.

A model of industrial satisfaction/complaining behavior

A model of the purchaser's satisfaction with supplier response to a formal buyer complaint is developed and tested. The authors answer two important questions: (1) what variables affect the purchasing agent's satisfaction with a supplier's response to a complaint? and (2) how can the supplier respond so as to keep that customer in the future?