Supply Chain Investment Research Articles

Stock Market Information and Innovative Investment in the Supply Chain

Abstract We investigate whether suppliers adjust innovative supply chain investment following stock market signals about customers’ economic prospects. We show that suppliers increase R&D and investment in customer-related patents after positive market reactions to customers’ new product announcements. A battery of falsification tests suggest that spurious factors are unlikely to explain our results. Market signals about customers appear more important when information asymmetry is greater, when suppliers face greater competitive threats, and when suppliers are financially unconstrained. Our evidence suggests that the stock market can be a viable source of information to mitigate supply chain frictions. (JEL G14, G30, L14)

Managing green innovation investment in a Co-opetitive supply chain under capital constraint

Responding the increasing concerns on environment and green consumerism, many firms found specialized environmental foundations to invest in green technology innovators (GTIs) and achieve green features in their products to attract consumers. However, facing increasing financial pressure during the economic downturn in recent years, they may have limited capital for green investments. In this paper, we investigate, in the presence of limited environmental foundation sizes, whether a pair of co-opetitive supply chain players (consisting of an Original Equipment Manufacturer (OEM) and a Contract Manufacturer (CM) that serves as both a supplier and a competitor in downstream market for the OEM) should co-invest in a joint GTI. We consider two scenarios, Scenario N where the OEM and CM respectively invest in two independent GTIs, and Scenario Y where the two firms co-invest in a joint GTI. We analyze both the exogenous or endogenous reward rates cases for the promoting of green innovation efforts of the GTIs. Under both exogenous and endogenous reward rates, we find that although Scenario Y always yields higher greenness level than Scenario N for both the OEM and CM, the OEM doesn’t always have incentive to do so due to the CM’s strategic use of wholesale price or reward rate decision responses, while the CM is always better off in Scenario Y when the reward rate is exogenous. We also find that the market size and competitive intensity will post significant impacts on the green innovation outcomes, wholesale price and reward rates decisions in the co-opetitive relationship. Intensified downstream quantity competition can motivate upstream innovation investment. However, greener technology may result in worse environmental performance for the whole supply chain because of increased total quantity.

Developing a framework for block chain adoption using TOE model

The purpose -Block chain has numerous benefits such as decentralization, persistency, anonymity, and auditability. Although a number of studies focus on using the block chain technology in various application aspects, there is not a specific previous study focus on the block chain technology in both technological context and business organizations through the supply chain flows. Therefore, the purpose of this paper empathizes how using the technological theories and block chain technologies through the supply chain will affect it as a whole; in addition to such adoption is very rare to be represented especially in developing countries as this part is fulfilled by our paper research. Design/methodology/approach – Data were collected through a self-created questionnaire a number of 427 respondents were included in the questionnaire analysis which were collected from employees of supply chain and logistics companies. Practical implications – The findings reveal the importance after conducting regression analysis and SEM, it was observed that reducing complexity and lowering supply chain investment costs associated with traditional supply chain transactions were some of the key drivers for block chain adoption, as well as a desire to benefit from enhanced compatibility and regulatory support. However, achieving security is considered as the main and most important driver. Originality/value -This research provides an insight to understand the significant dimensions of block chain adoption, where the dimensions of security, regulatory support, competitive pressure, compatibility, and complexity are found to have a significant effect on block chain adoption.

Supply chain investment and contracting for carbon emissions reduction: A social planner's perspective

We consider a supply chain consisting of a supplier and a buyer whose efforts jointly influence carbon emissions per unit of the product. The product demand is affected by the effort levels. The carbon footprint is allocated to the supply chain members by a social planner, and they pay carbon penalties for their allocated emissions. We first examine the social first-best solution and then analyze a no-collaboration scenario, where the supply chain members simultaneously make their own effort decisions under an allocation rule, and two supply chain contracting scenarios: credible buyer and double moral hazard, where the buyer designs and offers a contract to the supplier that specifies an order quantity and a payment scheme contingent on the realized carbon footprint. We find that the social planner may need to over- or under-allocate the emissions to the firms to induce the social first-best effort levels in the no-collaboration scenario. However, the social first-best effort levels can be attained with a simple allocation rule without over- or under-allocation in the credible buyer scenario. For the double moral hazard scenario, where the buyer is not credible to the supplier, the social first-best may not be attainable and there may be a significant loss in the social value of the supply chain.

Information Investment and Sharing in a Two-Echelon Supply Chain under Government Subsidy and Consumer Preference for Energy-Saving Products

This study establishes a two-echelon supply chain with one manufacturer who invests in energy-saving products (ESPs) and one retailer who sells the products and may possess demand-forecast advantage. Considering government subsidy and consumer preference for ESPs and a random demand, we develop a four-stage Stackelberg game model to research the optimal strategies of the information investment and sharing of the retailer and the energy-saving R&D of the manufacturer. The results show the following: (1) When incurring a low information investment cost, the retailer is willing to invest in information acquisition techniques, while the retailer agreeing to share market information is related to the government subsidies and the probability of a high demand. The optimal strategy for the retailer is to share information when the probability of a high demand is less than 50% and the government subsidies for ESPs are high. Otherwise, the optimal strategy is not to share information. (2) The manufacturer not always expects the retailer to share information, which depends on the probability of a high demand and manufacturing cost. Especially, when the probability of a high demand is less than 50%, only a manufacturer incurring high cost will expect. (3) If the retailer refuses to share the information, the manufacturer can motivate the retailer to change his/her decision by sharing the information investment cost.

Cost-Effectiveness Analysis of Supply Chain System: Sudan's National Medical Supplies Fund 2011-2014.

The objective of this study was to evaluate the economic impact of supply chain investment on the performance of the National Supply System of Essential Medicines in Sudan from 2011 to 2014. This is a retrospective cross-sectional study designed from National Medical Supplies Fund documents. The cost-effectiveness analysis involved an economic evaluation of the performance of the supply chain system, with the cost calculated by using the activity-based costing method, by examining a supply chain according to its main components or functions including the cost of procurement, central storage, distribution and management, and administrative function. Effectiveness of supply chain investment was measured as an indicator of supply chain performance, which includes availability, coverage, affordability, and building capacity indicators. Statistical analysis was performed by using Microsoft Excel 2010, STATA (version 14) and the level of statistical significance was set at p < .05 for all analyses. The new system in 2014 (Model B), which reflects the performance of the system after the NMSF started investing more in the supply chain, will probably be more costly than the baseline system of 2011 (Model A) but will produce a much higher level of performance. The incremental cost-effectiveness ratios of moving from the baseline system of 2011 (Model A) to the new system in 2014 (Model B) were $286,826.02 per percentage of availability of medicines at the central warehouse; $310,728.18 per percentage of medicines procured that have a median price ratio of 1 or less than 1; $149,149.53 per percentage of public health institutions' coverage by National Medical Supplies Fund (NMSF) services; and $12,682.78 per number of NMSF staff trained. A paired t test showed that there was a statistically significant difference between the average cost-effectiveness ratios of the 2 models. The investment in the supply chain had a significant impact on the performance of the National Supply System of Essential Medicines in Sudan. The new policies and interventions as embedded in the new 2014 model represent a more efficient and cost-effective approach, and a better performing system than the baseline model of 2011.

Cybersecurity investments in a two-echelon supply chain with third-party risk propagation

Cybersecurity presents a monumental challenge for interconnected supply chains, as an attack on one node can compromise an entire business. In this paper, we propose a game theory model to investigate cybersecurity investments with third-party risk propagation in a two-echelon supply chain consisting of one retailer and n suppliers. The optimal investments and their responses to relevant security characteristics, such as intrinsic vulnerability, propagation probability, number of suppliers, and attack probability, are analysed and discussed both theoretically and numerically considering one-stage risk propagation. It is found that there are serious prisoners' dilemma and free-riding phenomena in such a scenario. To mitigate third-party risks and improve the investment efficiency, three coordination mechanisms, joint decision, security risk compensation, and security information sharing, are presented and compared numerically. The results indicate that joint decision-making and security risk compensation perform better on stimulating firms' investments and reducing expected costs both individually and collectively relative to security information sharing. Furthermore, the case of two-stage risk propagation is also supplemented and compared with one-stage case. Based on these findings, some management insights are recommended to cybersecurity managers in supply chains for designing more efficient cybersecurity mechanisms and investment strategies.

Supply chain investment and de-escalation of capacity competition

Research on capacity competition has examined the conditions under which early mover’s capacity investment might preempt, or instead escalate, latecomers’ capacity investment. In contrast, this paper investigates the role of early mover’s supply chain investment in de-escalating subsequent capacity competition, in a setting where competing firms enter a new location to establish new production sites. Supply chain investment refers to investment in developing and integrating with supply chain partners in the location where a production site resides. We build a two-stage model where an early mover and a latecomer first make their investment decisions sequentially, and next choose either their output level (Cournot competition) or pricing (Bertrand competition) simultaneously. Predictions derived from the analytical model is then tested using data on a set of leading IT manufacturers. Both analytical and empirical results suggest that latecomer’s capacity investment increases correspondingly with early mover’s capacity investment, but decreases with early mover’s supply chain investment.

Risks of modular integrated construction: A review and future research directions

Stakeholders remain skeptical in adopting modular integrated construction (MiC) because of the associated risks and uncertainties, although its benefits have been extensively documented. The unique business model of MiC nurtures several risks and uncertainties different from those of the conventional construction approach. Despite the growing attention on MiC with its market expansion, no systematic evaluation is in place to monitor its risks research progress. Accordingly, this research reviewed published literature addressing the risks associated with MiC from 1992 to 2019. Analysis reveals that the research publications on risks of MiC witnessed a steady growth, with considerable progress occurring in the last decade. Result implies that the risk of MiC has gained extra attention in the construction engineering and management domain in recent times. Existing empirical studies have focused heavily on perceived implementation risks, supply chain risks, schedule risks, investment risks, structural risks, ergonomic risks, and MiC risk management strategies, which indicate that MiC is associated with a host of risk events. The research further identified the critical risk events (CREs) in the application of MiC based on frequency of occurrence. The identified CREs contributes to the checklists of risk events in the implementation of offsite construction (OSC). The latter may be useful in risk planning, especially where the MiC is less developed, and fewer or no bespoke risk assessment exists. Research gaps in existing studies are highlighted in this research, and areas for further studies are then proposed. Thus, it makes a useful contribution to the scholarly literature on the risk of OSC and may prove useful to offsite construction researchers, industry practitioners, and project managers.

Attribute of the Effects Diversification to Eco-System from Large Investments in Supply Chain

In most of the cases the decision to invest in a new large transport infrastructure project t is not simple, mainly, because the complications in planning process, the amount of capital need to invest before the business establishment and the high number of stakeholders involved in decision process. The decision process is more complicated in restricted economic conditions and financing assumptions, where the project business plan performance is strongly related to regional development prospects and business sectors enlargement. This paper provides an attribute methodology approach to support decisions in large transport infrastructure projects based on the effects diversification to ecosystem affected by the new projects. The proposed methodology provides an evaluation framework based on a combination of an ex-ante assessment analysis taking into consideration the large transport infrastructure projects economic impact and its contribution to enlargement of the sectors of the ecosystem.

Effective Use of Carbon Pricing on Climate Change Mitigation Projects: Analysis of the Biogas Supply Chain to Substitute Liquefied-Petroleum Gas in Mexico

There is presently an urgent demand for efficient and/or renewable energy technologies to correct global warming. However, these energy technologies are limited mainly by political and economic constraints of high costs and the lack of subsidy. Carbon-pricing strategies, such as carbon-emission taxes and carbon-emission trading schemes, may reduce this gap between sustainable and unsustainable energy technologies. Therefore, this paper seeks to analyze both of these carbon-pricing instruments in the Mexican energy sector to promote upgrading biogas investment and to substitute liquified petroleum gas consumption using an optimization approach. Furthermore, we propose a multi-objective optimization approach to encourage investment in the biogas supply chain supported by an effective use of carbon-pricing schemes. A case study of the central western region of Mexico was made to analyze the performance of the proposed methodologies. The results show that carbon-emission taxes and carbon-emission trading systems stimulate, with some limitations, the investment in biogas projects for fossil fuel substitution. Nevertheless, using the proposed multi-objective optimization formulation leads the discovery of a more efficient use of the above-mentioned carbon-pricing schemes, thus reaching higher economic and environmental benefits than traditional carbon-pricing policies, with a lower cost/price per ton of carbon dioxide equivalent.

A study on investments in the big data-driven supply chain, performance measures and organisational performance in Indian retail 4.0 context

The use of digital technologies such as ‘internet of things’ and ‘big data analytics’ have transformed the traditional retail supply chains into data-driven retail supply chains referred to as ‘Retail 4.0.’ These big data-driven retail supply chains have the advantage of providing superior products and services and enhance the customers shopping experience. The retailing industry in India is highly competitive and eager to transform into the environment of retail 4.0. The literature on big data in the supply chain has mainly focused on the applications in manufacturing industries and therefore needs to be further investigated on how the big data-driven retail supply chains influence the supply chain performance. Therefore, this study investigates how the retailing 4.0 context in India is influencing the existing supply chain performance measures and what effect it has on the organisational performance. The findings of the study provide valuable insights for retail supply chain practitioners on planning BDA investments. Based on a survey of 380 respondents selected from retail organisations in India, this study uses governance structure as the moderating variable. Implications for managers and future research possibilities are presented.

Evolutionary game of the green investment in a two-echelon supply chain under a government subsidy mechanism

Abstract Environmental issues have gradually become one of the most important concerns for society. The concept of green development has attracted increasing attention, and the green supply chain is generated under this background. Governments have played an important role in encouraging enterprises to make green investments. To identify the optimal green investment strategy under a government subsidy policy, this paper studies the strategy of green investment for manufacturers and material suppliers in a two-echelon supply chain. First, an evolutionary game theory model is developed between a population of suppliers and a population of manufacturers under a government subsidy mechanism. Then, the evolutionarily stable strategies for suppliers and manufacturers are discussed. Finally, a simulation of the model is conducted to further clarify the impact of the green investment and government subsidy of the model. The results show that the green investment input-output ratio of suppliers and manufacturers, or the government subsidy changes, will cause the system to evolve into a different evolutionarily stable strategy. The initial proportion of green investment can predict the trend of future evolution in the market, provide a reference for enterprises to choose their strategies, and facilitate further macro-control of the market by the government. Setting the government subsidy value in the relevant range can reduce the free-riding behavior of suppliers or manufacturers in the market.

A dynamic analysis of the investment in product innovation in a supply chain under reference price effect: competition vs cooperation

ABSTRACT This paper aims to investigate the effects of vertical competition or cooperation along a supply chain on product innovation under the reference effect. To this end, we develop game-theoretical models on the cooperative and non-cooperative supply chains and analyse the optimal decisions of the upstream manufacturer and the downstream retailer. Then, the innovation investment levels under vertical competition and under vertical cooperation are compared. We find that whether the innovation investment is higher under vertical competition depends critically on the strength of the reference effect. In particular, although a stronger reference effect lowers the product innovation investment in a cooperative supply chain, it may instead increase the investment in a non-cooperative supply chain if the retailer shares just a small proportion of the sales revenue with the manufacturer. As a result, the product innovation investment can be higher under vertical competition than under vertical cooperation in the presence of reference price effect, and even more so when the reference price effect grows stronger, the product innovation investment becomes more costly, and the demand for the product becomes more sensitive to price but less sensitive to quality.

Sustainability investment in maritime supply chain with risk behavior and information sharing

To comply with the stricter emission control regulations of recent years, shipping carriers, who may be risk averse, need to make decisions regarding their investments in environmental sustainability before market uncertainty is realized. The ports, as service providers of the carriers, may help the carriers on making such decisions through sharing market forecast information. In this study, we aim to examine the incentives of forecast information sharing from port and the effect of carrier's risk behavior on such sustainability investment decisions in a maritime supply chain. For this, we propose a two-period game-theoretic model framework. In this framework, both the port and the carrier face market uncertainty during the first period. The port determines whether to share its market forecast information with the carrier, and the carrier needs to decide her sustainability investment level. Then, in the second period, the port determines the service fee, and the carrier determines the freight rate to the customers. We analyze four different scenarios, based on the types of carrier's risk behavior and on whether the port decides to share the forecast information.We find that the relationship between sustainability investment level, and the port's service fee/the carrier's freight rate can be either positive or negative. We also show that the risk averse behavior reduces the carrier's profit, and lowers the level of sustainability investment, which in turn either positively or negatively influences the carrier's freight rate as before. Interestingly, the risk averse behavior always lowers the port's service fee. Moreover, we find that the forecast sharing from the port can not only improve the profits for both parties, but also facilitate the sustainability investment, even when the carrier is risk averse. We also find that the port always receives a larger percentage of the profit than the carrier.

Bullwhip severity in conditions of uncertainty: regional vs global supply chain strategies

PurposeUsing a phenomenon known as the bullwhip effect, the authors explore why additional uncertainty in the marketplace can create severe disruptions in global supply chains (GSCs). The purpose of this paper is to analyze related risks in regional vs GSCs during low and high levels of uncertainty. The authors propose and discuss a number of potential implications alongside some tactics that may help mitigate disruptions in some cases before they become terminal problems for the supply chain sustainability.Design/methodology/approachMonte Carlo simulation is used to generate the conditions of uncertainty and various scenarios that may emerge to challenge GSCs. Vensim software is utilized as a tool for simulation purposes. The authors considered scenarios applicable to manufacturing and retail sectors specifically because of storability property of goods.FindingsRegional supply chains, as opposed to global ones, are more stable and reliable (less risk of disruption) during low and high levels of uncertainty. During uncertain times, upstream suppliers are at greater risk in GSCs. Firms must make strategic decisions that will secure its supply chain functionality and assess the likelihood of such events since many firms entered emerging markets.Originality/valueBuilding on internalization theory, it shows that risk and survival are components of decision making that are further complicated by supply chains now operating globally in emerging markets. The paper demonstrates with simulation that GSCs are riskier than regional supply chains in low and high levels of uncertainty, particular as it relates to the bullwhip effect. It also provides recommendations about supply chain restructure and investments in communication improvements to reduce the bullwhip effect in the supply chain.

Friends along supply chain and relationship-specific investments

This study investigates whether the presence of school ties between supply chain partners encourages relationship-specific investments. Using Chinese data of educational backgrounds of corporate executives, we document a positive relation between a firm’s school ties with customers and the level of relationship-specific investments. This is consistent with school ties reducing information asymmetry between supply chain partners and mitigating suppliers’ “hold-up” concern when making investment decisions. The result is robust to a PSM approach, a change analysis and a Heckman two-stage analysis. In addition, we show that the association is stronger when customers have an opaque information environment, operate in weak legal environments, face lower switching cost to other suppliers or have higher operational uncertainty. Lastly, we examine the economic consequence of such school-tie associated investments, and find an impact of improved accounting and stock performance. Overall, our findings suggest that school ties benefit cooperation along supply chain by enhancing the level and efficiency of relationship-specific investments.

Pricing strategy for renewable energy source electricity in the competitive hybrid electricity market

PurposeTo promote the development of renewable energy, the Chinese Government adopts the policy of Feed-in Tariff and subsidy. However, the high purchase price and the intermittence limit the development of renewable energy source electricity (RES-E). The purpose of this paper is to discuss the pricing strategy for system operators to stimulate the development of the RES-E industry under the scenario of uncertain supply and demand.Design/methodology/approachThe authors establish a two-echelon supply chain investment model led by a power grid operator considering the uncertainties in both demand and supply, and study the impact of the power purchase price designed by a system operator using Stackelberg’s model.FindingsThere is an optimal capacity for RES-E generators, that is, independent of the market demand. Besides, the optimal order of grid operators is independent of the uncertain RES-E supply and the purchase price of fossil fuel. By properly setting the purchase prices, the system operator can stimulate the capacity investment in renewable energy. Finally, increasing the punishment in power shortage can stimulate the capacity investment in RES-E under certain conditions.Practical implicationsThe result of this paper can mitigate the phenomenon of power abandonment in the RES-E industry and promote the grid integration of RES-E.Originality/valueBoth uncertain demand and supply are considered in this paper. A heuristic algorithm is provided to compute the optimal purchase price combination.

Cold chain investment and pricing decisions in a fresh food supply chain

AbstractCold chains play an important role in reducing food spoilage, attracting food safety sensitive consumers, and guaranteeing food safety. Despite these advantages, the implementation of cold chains also calls for massive investment. Considering both costs and benefits of cold chains, our research established an optimization model for a fresh food supply chain to maximize its members' profits. Optimal investment levels of cold chain construction and advertisement, along with optimal pricing, were determined. The analysis shows that collaborative cold chain investment and collaborative pricing are superior strategies for the supply chain. Furthermore, we discuss the role of consumer food safety awareness and observe relatively high levels of cold chain investments and the mutually reinforcing effect of supply chain members' cold chain investments in a food safety sensitive market. Therefore, we suggest that governments should encourage improved food safety awareness among consumers to motivate cold chain investment and thus guarantee food safety.

Consumer sensitivity to delivery lead time: a furniture retail case

PurposeShort delivery time is a feature that can influence consumers’ purchasing decisions and that retailers compete over fiercely. Accordingly, evaluating the effect of delivery time on demand and identifying marketing-mix variables that alter this relationship may influence retailers’ strategies and impact supply chain (SC) performance. The paper aims to discuss these issues.Design/methodology/approachThis study was performed in collaboration with the largest furniture retailer in Italy, which provided its sales and inventory data for 19,000 units sold over a six-month period in 32 stores throughout Italy. Data were analysed using logistic regression with fixed effects.FindingsThe value of delivery time for consumers, even in an industry generally characterised by long delivery lead times, is surprisingly high. The evidence reveals that when the delivery time changes from two days to seven days, demand is reduced by 37.5 per cent, although variables related to location and the marketing mix moderate this relationship.Practical implicationsRetailers can use the findings presented herein to drive their inventory and facility planning decisions and support investments in SC integration.Originality/valueSupply chain management (SCM) studies consider the value of delivery time anecdotally and have neglected empirical estimations of the magnitude of the effects of delivery time on consumer demand. Further, SCM studies have not explored the factors moderating this relationship, although intertemporal choice and service management studies have demonstrated the existence of such factors.