Strategic Purchases of Bundled Products in a Health Care Supply Chain Environment*

Recent articles in the Wall Street Journal summarize the state of business practice in American hospitals by shedding light on the state of supply chain management practices and foci in today's health care supply chains. In health care, the single largest cost after labor is materials, and it has been documented that health care facilities can reduce the environmental impacts of the products and services they consume before regulatory problems arise or waste disposal costs increase by focusing on their upstream activities. Health care systems around the country consume significant quantities and varieties of products within the health delivery processes. Solving these environmental problems requires a much broader view involving collaborative efforts of professionals from different areas of health care to meet these challenges. The purchasing function bridges the gaps by providing a healthy dialogue on key environmental attributes within the health care supply chain. The concept of bundling new with refurbished products is gaining a lot of attention in the health care supply chain. This research describes a health care purchasing problem for bundling new and refurbished products of the type facing a growing number of large health care providers, and then proposes a methodology for evaluating the complex tradeoffs involved in bundling decisions for refurbished health care products. By exploiting some useful properties of the problem structure, our results provide buyers with useful insights for examining and selecting suppliers who are willing to offer bundles of new and refurbished products.     

Optimal Quantity Discount Design with Limited Information Sharing*

In this article we address the optimal quantity discount design problem of a supplier in a two‐stage supply chain where the supplier and the buyer share annual demand information only. The supply chain faces a constant deterministic demand that is not price sensitive and operates with fixed setup costs in both stages. We show that the supplier can actually moderate a cost‐minimizing buyer to order in quantities different than the buyer's optimal order quantity in the traditional setting and develop a multi‐breakpoint quantity discount scheme that maximizes supplier's expected net savings. The proposed multi‐breakpoint discount scheme can be easily computed from the available information and, while also maximizing the supplier's net savings, is very effective in achieving high levels of supply chain coordination efficiency in the presence of limited information.     

Explaining Anomalous High Performance in a Health Care Supply Chain*

An implicit assumption in distributing and coordinating work among independent organizations in a supply chain is that a focal organization can use financial or contractual mechanisms to enforce compliance among the other organizations in meeting desired performance objectives. Absent contractual agreement or financial gain, there is little incentive for independent organizations to coordinate their process improvement activities. In this study, we examine a health care supply chain in which the work is distributed among independent organizations. We use a detailed case study and an abductive reasoning approach to understand how and why the independent organizations choose to coordinate and collaborate in their work. Our study makes two contributions to the literature. First, we use well‐established lean principles to explain how independent organizations achieve superior performance despite highly uncertain and variable customer demand—a context considerably different from the origins of lean principles. Second, we forward relational coordination theory to explain why the organizations in this decentralized supply chain coordinate their work. Relational coordination includes the use of shared goals, shared knowledge, and mutual respect for one another's work as primary mechanisms to explain process improvement in the absence of any contractual incentives. Our study constitutes a first step in generating theory for work design and its improvement in decentralized supply chains.     

Trust,Morality, and the Privatization of Water Services in Developing Countries

This article examines the business of water privatization and the ethics implied in the transformation of the water services sector in developing countries. Drawing on data derived from field visits and semi‐structured interviews held with members of government, nongovernmental organizations, and other stakeholders in one country undergoing transformation in this sector, Ghana, the article considers the ethical perspectives of the various involved stakeholders. The analysis draws on three perspectives—Gilligan's ethic of care, Rawls’ principles of justice, and virtue ethics—which together highlight the economic, class, and gender‐based dimensions of the privatization debate. Finding that endemic mistrust characterizes this debate, the article considers what is needed to re‐instill trust among stakeholders. Specific implications are provided for business leaders and government policymakers.     

Promotion Planning and Supply Chain Contracting in a High–Low Pricing Environment

Demand forecast errors threaten the profitability of high–low price promotion strategies. This article shows how to match demand and supply effectively by means of two‐segment demand forecasting and supply contracts. We find that demand depends on the path of past retail prices, which leads to only a limited number of reachable demand states. However, forecast errors cannot be entirely eliminated because competitive promotions entail some degree of random (i.e., last‐minute) pricing. A hedging approach can be deployed to distribute demand risk efficiently over multiple promotional campaigns and within the supply chain. A retailer that employs a portfolio of forward, option, and spot contracts can avoid both stockouts and excess inventories while achieving the first‐best solution and Pareto improvements. We provide an improved forecasting method as well as stochastic programs to solve for optimal production and purchasing policies such that the right amount of inventory is available at the right time. By connecting a stockpiling model of demand with the supply side, we derive insights on optimal risk management strategies for both manufacturers and retailers in a market environment characterized by frequent price promotions and multiple discount levels. We employ a data set of the German retail market for a key generator of store traffic—namely, diapers.     

Adaptive Tactical Pricing in Multi‐Agent Supply Chain Markets Using Economic Regimes

In today's complex and dynamic supply chain markets, information systems are essential for effective supply chain management. Complex decision making processes on strategic, tactical, and operational levels require substantial timely support in order to contribute to organizations' agility. Consequently, there is a need for sophisticated dynamic product pricing mechanisms that can adapt quickly to changing market conditions and competitors' strategies. We propose a two‐layered machine learning approach to compute tactical pricing decisions in real time. The first layer estimates prevailing economic conditions—economic regimes—identifying and predicting current and future market conditions. In the second layer, we train a neural network for each regime to estimate price distributions in real time using available information. The neural networks compute offer acceptance probabilities from a tactical perspective to meet desired sales quotas. We validate our approach in the trading agent competition for supply chain management. When competing against the world's leading agents, the performance of our system significantly improves compared to using only economic regimes to predict prices. Profits increase significantly even though the prices and sales volume do not change significantly. Instead, tactical pricing results in a more efficient sales strategy by reducing both finished goods and components inventory costs.     

Identifying Demand and Supply of Part‐time Jobs Using Personnel Data. An Application to Italy

The percentage of part‐time workers in Italy is very low compared with most European countries. In this paper we try to contribute to an explanation. We use data on the employees of a large Italian company operating in the service sector, and apply a particular econometric framework that allows identification of potential demand and supply. We find that demand and supply are potentially very large on average, but they are difficult to match at the individual worker/job level. The firm might observe a relevant employee’s characteristics that are positively correlated with the employee’s propensity to a part‐time job but are negatively correlated with the profitability of that employee on that job. The firm might also use the revealed willingness to switch to a part‐time job as a sign that the employee is likely to be unprofitable for the company.     

Channel Coordination for a Supply Chain with a Risk‐Neutral Manufacturer and a Loss‐Averse Retailer*

This articles considers a decentralized supply chain in which a single manufacturer is selling a perishable product to a single retailer facing uncertain demand. It differs from traditional supply chain contract models in two ways. First, while traditional supply chain models are based on risk neutrality, this article takes the viewpoint of behavioral principal–agency theory and assumes the manufacturer is risk neutral and the retailer is loss averse. Second, while gain/loss (GL) sharing is common in practice, there is a lack of analysis of GL‐sharing contracts in the supply chain contract literature. This article investigates the role of a GL‐sharing provision for mitigating the loss‐aversion effect, which drives down the retailer order quantity and total supply chain profit. We analyze contracts that include GL‐sharing‐and‐buyback (GLB) credit provisions as well as the special cases of GL contracts and buyback contracts. Our analytical and numerical results lend insight into how a manufacturer can design a contract to improve total supply chain, manufacturer, and retailer performance. In particular, we show that there exists a special class of distribution‐free GLB contracts that can coordinate the supply chain and arbitrarily allocate the expected supply chain profit between the manufacturer and retailer; in contrast with other contracts, the parameter values for contracts in this class do not depend on the probability distribution of market demand. This feature is meaningful in practice because (i) the probability distribution of demand faced by a retailer is typically unknown by the manufacturer and (ii) a manufacturer can offer the same contract to multiple noncompeting retailers that differ by demand distribution and still coordinate the supply chains.     

A Flexible Evaluative Framework for Order Picking Systems

This paper develops a novel framework to evaluate the integral performance of order picking systems with different combinations of storage and order picking policies. The warehousing literature on order picking mostly considers minimizing either elapsed time or distance as the sole objective, whereas warehouse managers in a supply chain have to look beyond single‐dimensional performance and consider trade‐offs among different criteria. Thus managers still need a unified and efficient framework to select a portfolio of appropriate order picking policies from a multi‐criteria and contextual perspective. Our framework—combining data envelopment analysis, ranking and selection, and multiple comparisons—provides an efficient methodology to simultaneously analyze several interrelated problems in order picking systems with multiple performance attributes, such as service levels and operational costs. We demonstrate our approach through comprehensive evaluations of order picking policies in three low‐level, picker‐to‐parts rectangular warehouses facing demand variations.     

Changing Public Service Organizations: Current Perspectives and Future Prospects

As governments and public service organizations across the globe engage in strategies of institutional and organizational change, it is timely to examine current developments and a future research agenda for public governance and management. The paper commences with reflections on the state of the field, based on an analysis of papers published in the British Journal of Management over the last decade. While there was some variation apparent across the set, the ‘typical’ article was found to be influenced by the discipline of organizational behaviour, set within the health‐care sector, using case‐study methods within field‐based studies, and investigating shifts in roles and relationships and the management of change. It has also in the past been UK‐centric, though the journal editorial policy and our own article call for a stronger international and comparative focus in the future. The second section of the article summarizes the articles and themes contained in this collection of papers on public service organizations. The third section explores a possible research agenda for the future, arguing for the significance of public sector research for the understanding of management more generally, and for examining the interface between private and public organizations (an increasingly common phenomenon). We suggest the need to set public services research in policy and political contexts, and suggest this may reveal organizational processes of wide interest. We call for a wider set of disciplines to engage in public management research, and to engage in moving the agenda from the study of efficiency to effectiveness as defined by a variety of stakeholders. We address the issue of how far public management researchers should become directly engaged with the world of policy and suggest that whether researchers engage in Mode 1 or Mode 2 research, their work would benefit from a stronger theoretical base.     

A Modeling Framework for Supply Chain Simulation: Opportunities for Improved Decision Making*

Owing to its inherent modeling flexibility, simulation is often regarded as the proper means for supporting decision making on supply chain design. The ultimate success of supply chain simulation, however, is determined by a combination of the analyst's skills, the chain members' involvement, and the modeling capabilities of the simulation tool. This combination should provide the basis for a realistic simulation model, which is both transparent and complete. The need for transparency is especially strong for supply chains as they involve (semi)autonomous parties each having their own objectives. Mutual trust and model effectiveness are strongly influenced by the degree of completeness of each party's insight into the key decision variables. Ideally, visual interactive simulation models present an important communicative means for realizing the required overview and insight. Unfortunately, most models strongly focus on physical transactions, leaving key decision variables implicit for some or all of the parties involved. This especially applies to control structures, that is, the managers or systems responsible for control, their activities and their mutual attuning of these activities. Control elements are, for example, dispersed over the model, are not visualized, or form part of the time‐indexed scheduling of events. In this article, we propose an alternative approach that explicitly addresses the modeling of control structures. First, we will conduct a literature survey with the aim of listing simulation model qualities essential for supporting successful decision making on supply chain design. Next, we use this insight to define an object‐oriented modeling framework that facilitates supply chain simulation in a more realistic manner. This framework is meant to contribute to improved decision making in terms of recognizing and understanding opportunities for improved supply chain design. Finally, the use of the framework is illustrated by a case example concerning a supply chain for chilled salads.     

HISTORY OF TECHNOLOGY,MANUFACTURING, AND THE INDUSTRIAL REVOLUTION: AN ALTERNATE PERSPECTIVE ON SCHMENNER'S HYPOTHESES

Two simultaneous developments took place during the so‐called Industrial Revolution (1760–1830): the industrialization of Britain and other countries in Europe and the deindustrialization of a number of non‐European countries, including India. I identify international relations as a major driver of the three components—demand, innovations, and capital formation—of the Industrial Revolution. I also offer an alternate perspective on hypotheses proposed by Schmenner in the preceding article in this issue.     

A Transaction‐Efficiency Analysis of an Internet Retailing Supply Chain in the Music CD Industry*

The emergence of the Internet may have fundamentally altered the mechanisms underlying information exchanges between sellers and end consumers. However, little attention has been given to the impact these mechanisms have on the efficiency of supply chain operations. This paper begins to address this deficiency in the literature by evaluating supply chain transaction efficiency effects from Internet purchases by consumers. It develops and empirically tests a theoretical framework examining the role Internet purchases have in establishing transaction‐efficiency levels in product exchanges involving sellers, placed at different supply chain echelons, and consumers. The theoretical framework integrates the transaction‐cost and internet economics, inter‐organizational information systems, and supply chain management literatures. Empirical testing, via structural equation modeling, is based on archival data in the Internet music CD market. The results show that Internet‐mediated purchases by consumers allow for greater transaction efficiencies when inventory ownership is postponed farther upstream in the supply chain and supply chain echelons are disintermediated. The results also indicate that channel structure configuration, defined by the supply chains' Internet retailing echelon, moderates these transaction efficiency effects.     

The Impact of Forecast Errors on Early Order Commitment in a Supply Chain*

Supply chain partnership involves mutual commitments among participating firms. One example is early order commitment, wherein a retailer commits to purchase a fixed‐order quantity and delivery time from a supplier before the real need takes place. This paper explores the value of practicing early order commitment in the supply chain. We investigate the complex interactions between early order commitment and forecast errors by simulating a supply chain with one capacitated supplier and multiple retailers under demand uncertainty. We found that practicing early order commitment can generate significant savings in the supply chain, but the benefits are only valid within a range of order commitment periods. Different components of forecast errors have different cost implications to the supplier and the retailers. The presence of trend in the demand increases the total supply chain cost, but makes early order commitment more appealing. The more retailers sharing the same supplier, the more valuable for the supply chain to practice early order commitment. Except in cases where little capacity cushion is available, our findings are relatively consistent in the environments where cost structure, number of retailers, capacity utilization, and capacity policy are varied.     

Impacts of Power Structure on Supply Chains with Uncertain Demand

In this study, we use a game‐theory‐based framework to model power in a supply chain with random and price‐dependent demand and examine how power structure and demand models (expected demand and demand shock) affect supply chain members' performance. We demonstrate that whether a firm benefits from its power depends on the expected demand model but not on demand shock model. A firm benefits from its power only for linear but not for constant elasticity expected demand. The impact of power structure on supply chain efficiency depends on the models of both expected demand and demand shock. With additive shock, supply chain efficiency is highest (lowest) when neither firm dominates for linear (constant elasticity) expected demand. With multiplicative shock, the supply chain efficiency is highest with a power retailer (manufacturer) for linear (constant elasticity) expected demand. The manufacturer always benefits from a reduction in demand uncertainty. However, the retailer loses (benefits) from demand uncertainty reduction for linear (constant elasticity) expected demand. With a power retailer, the retail price is always on the higher end for linear expected demand, and the customer service level is the lowest for constant elasticity expected demand. Consequently, consumers do not necessarily benefit from a power retailer.     

A School Feeding Supply Chain Framework: Critical Factors for Sustainable Program Design

School feeding is an established development aid intervention with multiple objectives including education, nutrition, and value transfer. Traditionally run by international organizations in low‐income settings, school feeding programs have had a substantial impact in many less‐developed countries. However, recent rethinking by the World Bank and the World Food Programme has prompted a shift toward long‐term, sustainable solutions that rely more upon local resources, local capacity, and community participation. Supply chain management, which is critical to program delivery, is vital to developing a sustainable approach to school feeding. We propose a theoretical framework that identifies the internal and external factors that shape the supply chain and connects them to the objectives and performance measures of sustainable programs. Drawing upon supply chain management theory, current school feeding practices, and expert feedback, this article contributes to development aid logistics and program transitioning with a focus on sustainable program design. It aims to provide a comprehensive introduction to school feeding and relevant supply chain issues, a framework to identify sustainability problems in school feeding supply chains, and a starting point for further research on program design.     

Managing Demand Risk in Tactical Supply Chain Planning for a Global Consumer Electronics Company

We consider the problem of managing demand risk in tactical supply chain planning for a particular global consumer electronics company. The company follows a deterministic replenishment‐and‐planning process despite considerable demand uncertainty. As a possible way to formally address uncertainty, we provide two risk measures, “demand‐at‐risk” (DaR) and “inventory‐at‐risk” (IaR) and two linear programming models to help manage demand uncertainty. The first model is deterministic and can be used to allocate the replenishment schedule from the plants among the customers as per the existing process. The other model is stochastic and can be used to determine the “ideal” replenishment request from the plants under demand uncertainty. The gap between the output of the two models as regards requested replenishment and the values of the risk measures can be used by the company to reallocate capacity among different products and to thus manage demand/inventory risk.     

Supply Chains and Global Health: An Imperative for Bringing Operations Management Scholarship into Action

Many people in developing countries do not have access to effective vaccines, medicines, and other life‐saving health technologies. Shortage of health care workers, severe financial constraints, and lack of awareness are some of the major obstacles that prevent higher access. However, ineffective and poorly designed supply chains for purchasing and distributing the medicines, vaccines, and health technologies are one of the most important barriers to increasing access. We argue that the ineffectiveness of the global health supply chain can be attributed largely to: coordination problems across multiple stakeholders with widely divergent objectives, lack of careful supply chain design, and use of myopic operational objectives and metrics. The operations management research community can contribute to improving this by applying existing knowledge to the field of global health delivery and by researching new frameworks of analysis which would then become the cornerstones for policy advice to those who design, operate, or finance these supply chains.     

Managing Imbalanced Supply Chain Relationships for Sustainability: A Power Perspective

This study adopts a power perspective to investigate sustainable supply chain relationships and specifically uses resource‐dependence theory (RDT) to critically analyze buyer–supplier–supplier relationships. Empirical evidence is provided, extending the RDT model in this context. The concept of power relationships is explored through a qualitative study of a multinational company and agricultural growers in the UK food industry that work together to implement sustainable practices. We look at multiple triadic relationships involving a large buyer and its small suppliers to investigate how relative power affects the implementation of sustainable supply‐management practices. The study highlights that power as dependence is relevant to understanding compliance in sustainable supply chains and to identifying appropriate relationship‐management strategies to build more sustainable supply chains. We show the influences of power on how players manage their relationships and how it affects organizational responses to the implementation of sustainability initiatives. Power notably influences the sharing of sustainability‐related risks and value between supply chain partners. From a managerial perspective, the study contributes to developing a better understanding of how power can become an effective way to achieve sustainability goals. This article offers insights into the way in which a large organization works with small and medium size enterprises to implement sustainable practices and shows how power management—that is, the way in which power is used—can support or hinder effective cooperation around sustainability in the supply chain.     

A GLOBAL VIEW OF CROSS‐BORDER MIGRATION

This paper evaluates the global welfare impact of observed levels of migration using a quantitative multi‐sector model of the world economy calibrated to aggregate and firm‐level data. Our framework features cross‐country labor productivity differences, international trade, remittances, and a heterogeneous workforce. We compare welfare under the observed levels of migration to a no‐migration counterfactual. In the long run, natives in countries that received a lot of migration—such as Canada or Australia—are better off due to greater product variety available in consumption and as intermediate inputs. In the short run, the impact of migration on average welfare in these countries is close to zero, while the skilled and unskilled natives tend to experience welfare changes of opposite signs. The remaining natives in countries with large emigration flows—such as Jamaica or El Salvador—are also better off due to migration, but for a different reason: remittances. The welfare impact of observed levels of migration is substantial, at about 5% to 10% for the main receiving countries and about 10% in countries with large incoming remittances.