Supply Ability Research Articles

Competition for Procurement Contracts with Service Guarantees

We consider a market with two suppliers and a set of buyers in search of procurement contracts with one of the suppliers. In particular, each buyer needs to process a certain volume of work, and each supplier's ability to process the customers' requests is constrained by a production capacity. The procurement contracts include guarantees that the products will be available when needed, and the buyers select a supplier based on their service delivery offers. The suppliers are modeled as make-to-stock queues and compete for the buyers' business. The main objective of this paper is to determine how the procurement contracts are established between buyers and suppliers. Because each buyer selects a single supplier to establish the sourcing relationship, the game fails to have a pure-strategy Nash equilibrium. Instead, an equilibrium is defined as the limit equilibrium of some discrete action games.

EXTRACTING VALUE FROM CLIENT RELATIONSHIPS: EXPERTISE AND CROSS-SELLING IN THE UK LEGAL MARKET.

This article examines value creation and extraction in client relationships, with particular focus on two drivers of a suppliers' value capture, which are the expertise of the supplier and cross-selling, both by a supplier and competitors. The British legal market is used as a data set. Particular focus is also given to the implementation of a value-based framework originally proposed by researchers Brandenburger and Stuart. Results indicate that the variables which measure competition at the client relationship level affect supplier profitability and that a supplier's ability to extract value from client relationships depends also on that supplier's level of expertise and how clients enact competition.

Supplier performance improvements in relational exchanges

PurposeThis study aims to test both customer and supplier performance benefits associated with closer relational exchanges in light of both resource and technological environmental contingencies.Design/methodology/approachThe research involved a survey of 1,170 managers in the pulp and paper industry to understand their relationship with their primary supplier of process control equipment (PCE). Each respondent was asked to provide their views on the closeness of their supplier relationship, the performance gains realized from their supplier relationships, and the linkage between their performance gains and improvements in supplier performance.FindingsThe results indicate that although customers may be achieving better performance through closer relationships, suppliers may not always be reaping reciprocal benefits. Specifically, improvements in customer purchasing performance did not result in improved supplier performance, but customer improvements in production performance resulted in supplier performance gains.Research limitations/implicationsThe study focused on the exchange of one product line, PCE, within one industry. Further research is necessary to investigate customer‐supplier relationships involving other products such as parts and material incorporated into the customer's end product and crossing multiple industries. In addition, further research is needed to develop and test other potential performance outcomes and environment contingencies.Originality/valueSince mutual performance improvements may not always be achieved in relational exchanges, this study suggests some critical considerations for suppliers making decisions to pursue closer customer relationships. These important considerations include the competitive nature of the supplier's market, the customer's desired performance improvement, the customer's level of internal expertise or knowledge, and the supplier's ability to provide differentiated products, services and knowledge.

The strategic effects of a merger upon supplier interactions

AbstractWe consider how a merger between two naturally differentiated dealers affects their interactions with a common supplier and identify conditions under which the merger can increase or decrease the combined net worth of the two firms. Among other things, we find that the attractiveness of merging depends upon the extent to which end demand can be stimulated by either an upstream supplier or the dealers. Specifically, the greater the supplier's ability to invest in stimulating end demand, the more likely it is that the naturally differentiated firms will be better off operating independently than merging. On the other hand, if the greatest opportunities for stimulating demand are through the service that is provided by the dealers, then merging their operations will be more attractive. © 2006 Wiley Periodicals, Inc. Naval Research Logistics, 2007

Activity‐Based Pricing in a Monopoly

abstractIn this article, I study the interaction between cost accounting systems and pricing decisions in a setting where a monopolist sells a base product and related support services to customers whose preference for support services is known only to them. I consider two pricing mechanisms—activity‐based pricing (ABP) and traditional pricing—and two cost‐accounting systems—activity‐based costing (ABC) and traditional costing, for support services. Under traditional pricing, only the base product is priced, whereas support services are provided free because detailed cost‐driver volume information on the consumption of support services by each customer is unavailable. Under ABP, customers pay based on the quantities consumed of both the base product and the support services because detailed cost‐driver volume information is available for each customer. Likewise, under traditional costing for support services the firm makes pricing decisions on cost signals that are noisier than they are under ABC. I compare the equilibrium quantities of the base product and support services sold, the information rent paid to the customers, and the expected profits of the monopolist under all four combinations of cost‐driver volume and cost‐driver rate information.I show that ABP helps reduce control problems, such as moral hazard and adverse selection problems, for the supplier and increases the supplier's ability to engage in price discrimination. I show that firms are more likely to adopt ABP when their customer base is more diverse, their customer support costs are more uncertain, their costing system has lower measurement error, and the variable costs of providing customer support are higher. Firms adopt ABC when their cost‐driver rates for support services under traditional costing are noisier measures of actual costs relative to their cost‐driver rates under ABC and when the actual costs of support services are inherently uncertain. I also show that cost‐driver rate information and cost‐driver volume information for support services are complements.Although the prior literature views ABC and activity‐based management (ABM) as facilitating better decision making, I show that ABC and ABP (a form of ABM) are useful tools for addressing control problems in supply chains.

Ensuring the benefits of requiring supplier capability analysis

AbstractThe assumed trade‐off between cost and quality often brings CFOs, controllers, and management accountants into the process of selecting and certifying suppliers. After all, high‐quality products cannot be produced from poor‐quality components. Capability analysis can be an effective tool for monitoring a supplier's ability to meet its quality requirements. Therefore, accountants should help ensure three things: that a supplier's process is capable, that the supplier uses a valid sampling plan, and that the process is stable and predictable. © 2002 Wiley Periodicals, Inc.

Supplier Selection and Assessment: Their Impact on Business Performance

SUMMARYIncreasingly, firms are allocating more resources to their core competencies and encouraging the outsourcing of non‐core activities, which increases their reliance and dependence on suppliers. This increases the importance of effective supplier selection and assessment. Sparse evidence exists regarding the impact of supplier selection and assessment on a buying firm's business performance. This research describes an empirical study of the importance of supplier selection and assessment criteria of American manufacturing companies for items to be used in products already in production. Moreover, it identifies relationships between criteria and a buying firm's business performance. Results indicate that soft, non‐quantifiable selection criteria, such as a supplier's strategic commitment to a buyer, have a greater impact on performance than hard, more quantifiable criteria such as supplier capability, yet are considered to be less important. Assessment of a supplier's willingness and ability to share information also has a significant impact on the buying firm's performance, yet is again considered to be relatively unimportant.

The role of trust and relationship structure in improving supply chain responsiveness

In order to reduce cycle times between supply chain entities, managers must work to create new relational forms that rely on trust to a greater extent. We present a model suggesting that to build relationships based on trust, suppliers must invest in site-specific and human assets, and buyers must judiciously apply contracts to control for relative levels of dependence within the relationship. Our model also suggests that buyer-dependence, supplier human asset investments, and trust are all positively associated with improved supply chain responsiveness, defined in this study as the supplier's ability to quickly respond to the buying party's needs. This model is tested with data gathered from a sample of purchasing managers in North American manufacturing firms. The results suggest that even in cases when buyers do not have a great deal of control over their suppliers, working to build trust within the relationship can improve supplier responsiveness.

The Value of Information Integration in Meeting Delivery Dates

In this article, we consider the value of shared information within a business network. To make the problem concrete, we focus on a specific operational problem: How the final supplier to the customer determines promised delivery dates. In a traditional supply chain, the final supplier has little or no information on the delivery performance of intermediate suppliers and thus, has limited information with which to set delivery dates. On the other hand, in an information-integrated business network, the final supplier's enterprise resource planning (ERP) system can interact with all the intermediate suppliers' ERP systems to determine exactly how far ahead or behind schedule the network is in meeting the needs of a specific customer. This information should improve the final supplier's ability to set realistic delivery dates. We attempt to quantify the value of this information and determine precisely why it is valuable so that management can best exploit information integration. We use a modeling approach in this research, beginning with simple analytic models and progressing to more realistic simulation models. Our analytic model establishes an important principle: Information integration not only significantly improves the average on-time delivery performance of a business network, but also dramatically improves its worst-case performance. Because customer dissatisfaction is generally associated with worst-case performance, information integration may be highly beneficial even if its effect on average on-time delivery is small. Simulation models allow us to compare the performance of more realistic business networks. These models suggest, for example, that the value of information integration is dependent on both the structure of the network itself (whether serial or arborescent) and on the typical customer order date in the production cycle. These insights allow us to begin to identify the types of business networks in which information integration will have the highest value.

Vertical Enclosure: Vertical Integration and the Reluctance to Purchase from a Competitor

Vertical integration affects a supplier's ability to sell to competing downstream units. If downstream units must commit to a supplier prior to contracting on the final terms of trade, then suppliers have ex-post monopoly power over their customers. This monopoly power increases a supplier's ability to influence competition between its customers. Vertical integration leads a supplier to favor its own downstream unit. Such favoritism reduces a downstream unit's gain from trading with a vertically integrated competitor. This effect can be powerful enough to make downstream firms refuse to purchase from a vertically integrated competitor. The opportunity cost of this forgone trade can be sufficient to lead firms to forgo mergers predicted by bilateral models of vertical integration.

Heat treatment and bending of low-E glass

Automotive companies continue to pressure their suppliers to control cost, and the glass industry, in particular, has had a difficult time penetrating the automotive market with new, innovative, added value products. An exception where both the customer's needs and the supplier's ability to meet these needs have been satisfied is the application of coatings for automotive glazing to efficiently reduce solar heat load in vehicles. Automotive designers are pushing the limits on steep installation angles and increasing glazing areas in vehicles, while the demand for fuel efficiency and environmental concerns are driving the downsizing and efficiency of air conditioning units. Under these conditions the use of tinted glass, which absorbs solar energy, is limited in adequately providing driver comfort. The use of low-E coatings, which reflect the solar energy, is a more efficient way of reducing the solar heat buildup. The widespread use of coated low-E for solar glazing in vehicles owes its existence to a cost effective manufacturing process which requires that the glass is first coated flat, rather than bent. The flat coated glass is then subsequently bent and laminated, or tempered. Heat treatable multilayer coatings have been developed containing two layers of silver that are finding wide use today in both the automotive and building industries. In addition, since the coating is conductive, a windshield, e.g. can serve a range of functions such as antenna, or defroster and deicer.

Uses of Process Capability Indices in the Supplier Certification Process

Process capability analysis is used widely to determine a supplier's ability to produce material that meets customers' requirements. To simplify the performance rating process, capability indices are commonly used. These indices are gaining even more us..

Document Delivery: A Comparison of Commercial Document Suppliers and Interlibrary Loan Services

Cost-effective and timely document delivery is becoming a major concern as many academic libraries face cuts in serials budgets. This study examines the costs and response times of traditional interlibrary loan (ILL) services and four commercial document suppliers. From October 1991 to February 1992, a total of 52 periodical requests were sent through Online Computer Library Center's (OCLC's) Interlibrary Loan subsystem simultaneously to academic libraries and to four document suppliers. Data were gathered on each supplier's ability to fill the requests, and the costs, turnaround times, and the quality of the articles supplied. Results indicated that traditional ILL was the most cost-effective and one of the quickest means of obtaining articles not owned by our library

Inventory problems under multiple constraints: Some studies

This paper outlines some real-life inventory problems faced by manufacturing firms under multiple constraints relating to investment capability, storage space availability, supplier's supply ability, various classes of customer demands and production policy. Relatively simple models and their solution strategies have been depicted to make them transferable and diffusable to the decision-making domain of manufacturing management. To strengthen the applicability of such models, various implications have been highlighted.

Approaches to nuclear fuel assurance Balancing nonproliferation with energy security

Nuclear fuel assurances are the formal promises that international suppliers extend to consumers of nuclear fuel for the twin purpose of meeting energy security needs and discouraging the proliferation of nuclear weapons. This article examines various international perspectives on the implementation of fuel assurances and suggests that a supplier's unilateral ability to solve either problem may be far more limited than is commonly believed. The relevance of fuel assurances in future international regimes for nuclear energy will be dependent upon the future structure of the nuclear market and the political linkages that are made between energy security and nonproliferation commitments.

Heat conducting glass keeps ice from windshield

Automotive companies continue to pressure their suppliers to control cost, and the glass industry, in particular, has had a difficult time penetrating the automotive market with new, innovative, added value products. An exception where both the customer's needs and the supplier's ability to meet these needs have been satisfied is the application of coatings for automotive glazing to efficiently reduce solar heat load in vehicles. Automotive designers are pushing the limits on steep installation angles and increasing glazing areas in vehicles, while the demand for fuel efficiency and environmental concerns are driving the downsizing and efficiency of air conditioning units. Under these conditions the use of tinted glass, which absorbs solar energy, is limited in adequately providing driver comfort. The use of low-E coatings, which reflect the solar energy, is a more efficient way of reducing the solar heat buildup. The widespread use of coated low-E for solar glazing in vehicles owes its existence to a cost effective manufacturing process which requires that the glass is first coated flat, rather than bent. The flat coated glass is then subsequently bent and laminated, or tempered. Heat treatable multilayer coatings have been developed containing two layers of silver that are finding wide use today in both the automotive and building industries. In addition, since the coating is conductive, a windshield, e.g. can serve a range of functions such as antenna, or defroster and deicer.