Supply Management Under High Goal Incongruence: An Empirical Examination of Disintermediation in the Aerospace Supply Chain

Aftermarket sales and profits are becoming an increasingly important part of an original equipment manufacturer's (OEM) business model. Because replacement parts often do not require further manufacturing, OEMs act as intermediaries in the aftermarket. As with any intermediary, the OEM must concern itself with suppliers disintermediating its supply chain selling replacement parts directly to the OEM's customers. We frame supply chain disintermediation (SCD) as a principal–agent contracting problem between an OEM buyer and a supplier. Hypotheses relate contract conditions, goal incongruence, supplier capabilities and contract enforcement to SCD. The data are collected from the aerospace industry using a multimethod study, combining an Internet‐based survey with archival data. Causal modeling with structural equation modeling (SEM) shows general support for the hypotheses. Particularly, SCD is positively related to buyer–supplier goal incongruence. The agency model offers insights that differ from previous transaction‐cost‐based models of buyer–supplier relationships. OEM buyers with a lucrative aftermarket should consider aligning goals through incentives rather than relying entirely on economic hostages associated with specific assets.     

On the Advantage of Quantity Leadership When Outsourcing Production to a Competitive Contract Manufacturer

This study investigates a supply chain comprising an original equipment manufacturer (OEM) and a contract manufacturer (CM), in which the CM acts as both upstream partner and downstream competitor to the OEM. The two parties can engage in one of three Cournot competition games: a simultaneous game, a sequential game with the OEM as the Stackelberg leader, and a sequential game with the CM as the Stackelberg leader. On the basis of these three basic games, this study investigates the two parties' Stackelberg leadership/followership decisions. When the outsourcing quantity and wholesale price are exogenously given, either party may prefer Stackelberg leadership or followership. For example, when the wholesale price or the proportion of production outsourced to the CM is lower than a threshold value, both parties prefer Stackelberg leadership and, consequently, play a simultaneous game in the consumer market. When the outsourcing quantity and wholesale price are decision variables, the competitive CM sets a wholesale price sufficiently low to allow both parties to coexist in the market, and the OEM outsources its entire production to this CM. This study also examines the impact of the supply chain parties' bargaining power on contract outcomes by considering a wholesale price that is determined via the generalized Nash bargaining scheme, finding a Stackelberg equilibrium to be sustained when the CM's degree of bargaining power is great and the non‐competitive CM's wholesale price is high.     

Forecast Updating and Supplier Coordination for Complementary Component Purchases

We study a supply chain where an original equipment manufacturer (OEM) buys subassemblies, comprised of two complementary sets of components, from a contract manufacturer (CM). The OEM provides a demand forecast at the time when the CM must order the long lead‐time set of components, but must decide whether or not to provide updated forecasts as a matter of practice. Forecast updates affect the CM's short lead‐time purchase decision, and the anticipation of updates may also affect the long lead‐time purchase decision. While the OEM and CM both incur lost sales costs, the OEM can decide whether or not to share the overage costs otherwise fully borne by the CM. We investigate when the OEM is better served by committing to provide updated forecasts and/or committing to share overage costs. For a distribution‐free, two‐stage forecast‐update model, we show that (1) the practice of providing forecast updates may be harmful to the OEM and (2) at the OEM's optimal levels of overage risk sharing, the CM undersupplies relative to the supply chain optimal quantity. For a specific forecast‐update model, we computationally investigate conditions under which forecast updating and risk sharing are in the best interest of the OEM.     

The Comparison of Two Vertical Outsourcing Structures under Push and Pull Contracts

In a three‐tier supply chain comprising an original equipment manufacturer (OEM), a contract manufacturer (CM), and a supplier, there exist two typical outsourcing structures: control and delegation. Under the control structure, the OEM contracts with the CM and the supplier respectively. Under the delegation structure, the OEM contracts with the CM only and the CM subcontracts with the supplier. We compare the two outsourcing structures under a push contract (whereby orders are placed before demand is realized) and a pull contract (whereby orders are placed after demand is realized). For all combinations of outsourcing structures and contracts, we derive the corresponding equilibrium wholesale prices, order quantities, and capacities. We find that the equilibrium production quantity is higher under control than under delegation for the push contract whereas the reverse holds for the pull contract. Both the OEM and the CM prefer control over delegation under the push contract. However, under the pull contract, the OEM prefers control over delegation whereas the CM and the supplier prefer delegation over control. We also show that for a given outsourcing structure, the OEM prefers the pull contract over the push contract. In extending our settings to a general two‐wholesale‐price (TWP) contract, we find that when wholesale prices are endogenized decision variables, the TWP contract under our setting degenerates to either a push or a pull contract.     

Designing Supply Contracts Considering Profit Targets and Risk

Managers at all stages of a supply chain are concerned about meeting profit targets. We study contract design for a buyer–supplier supply chain, with each party maximizing expected profit subject to a chance constraint on meeting his respective profit target. We derive the optimal contract form (across all contract types) with randomized and deterministic payments. The best contract has the property that, if the chance constraints are binding, at most one party fails to satisfy his profit target for any given demand realization. This implies that “least risk sharing,”that is, minimizing the probability of outcomes for which both parties fail to achieve their profit targets, is optimal, contrary to the usual expectations of “risk sharing.” We show that an optimal contract can possess only two of the following three properties simultaneously: (i) supply chain coordination, (ii) truth‐telling, and (iii) non‐randomized payments. We discuss methods to mitigate the consequent implementation challenges. We also derive the optimal contract form when chance constraints are incorporated into several simpler and easier‐to‐implement contracts. From a numerical study, we find that an incremental returns contract (in which the marginal rebate rate depends on the return quantity) performs quite well across a relatively broad range of conditions.     

Delegation vs. Control in Supply Chain Procurement under Competition

This paper studies the optimal component procurement strategies of two competing OEMs selling substitutable products. The OEMs outsource their production to a common contract manufacturer, who in turn needs an input from a component supplier. Each OEM may either directly procure the input from the component supplier, or delegate the procurement task to the contract manufacturer. We first analyze the OEMs' procurement game under a non‐strategic supplier whose component price is exogenously given. It is found that symmetric equilibria arise for most situations, that is, both OEMs either control or delegate their component procurement in equilibrium. Interestingly, despite the commonly‐held belief that the contract manufacturer would be worse off as OEMs gain component procurement control, we show that the contract manufacturer may enjoy a higher profit. Then we study the OEMs' procurement game under a strategic supplier who can set its component price. We find that the supplier's strategic pricing behavior plays a critical role in the equilibrium procurement structure. In particular, in the equilibrium under strategic supplier, the larger OEM always uses delegation while the smaller OEM may use either delegation or control. By identifying the driving forces behind the OEMs' procurement choices, this research helps explain observed industry practices and offer useful guidelines for firms' component sourcing decisions.     

Managing High‐Tech Capacity Expansion via Reservation Contracts

We study capacity reservation contracts between a high‐tech manufacturer (supplier) and her OEM customer (buyer). The supplier and the buyer are partners who enter a ‘design‐win” agreement to develop the product, and who share the stochastic demand information. To encourage the supplier for more aggressive capacity expansion, the buyer reserves capacity upfront by paying a deductible fee. As capacity expansion demonstrates diseconomy of scale in this context, we assume convex capacity costs. We show that as the buyer's revenue margin decreases, the supplier faces a sequence of four profit scenarios with decreasing desirability. We examine the effects of market size and demand variability to the contract conditions. We propose two channel coordination contracts, and discuss how such contracts can be tailored for situations where the supplier has the option of not complying with the contract, and when the buyer's demand information is only partially updated during the supplier's capacity lead‐time.     

The Role of Revenue‐Focused Managerial Performance Measures in Supply Chain Coordination

Many firms employ revenue‐focused managerial performance measures (RF‐MPMs) that cause managers to worry more about revenues than about costs. Although this can seemingly misalign the interests of a manager, we show that the use of such measures can help supply chain partners to overcome hold‐up issues with respect to capacity and promotion investments. We develop a game theoretic model in which two supply chain partners engage in repeated interactions in which the supplier invests in capacity and the buyer invests in demand promotion. Following the realization of demand in each period, the two firms negotiate over the output quantity and wholesale price. The novelty of our model is that we allow the owners of each firm to delegate decision‐making power and negotiating responsibility to a free‐agent manager. We characterize the conditions under which the owners of both firms employ RF‐MPMs in equilibrium and benefit from doing so. For a special case of our model, we show that for the owners of the buyer, an RF‐MPM is equivalent to a price only relational contract, and that it complements a price and quantity relational contract as a mechanism for mitigating hold‐up issues.     

生产商规模不经济的双渠道供应链协调策略选择

供应链协调是提高供应链整体利润、改善供应链各方利益的根本手段.旨在探讨生产商具有生产规模不经济特性的双渠道供应链协调策略.给出了集中决策下双渠道供应链的市场价格与整体利润,以及分散决策下批发价契约与收益共享契约的设计方法.提出了协调度的概念,即契约使供应链协调的程度.证明了批发价契约的协调度小于1,不能实现供应链的协调;而收益共享契约的协调度等于1,但相对于批发价契约,收益共享契约不能同时改善零售商和生产商的利润,导致收益共享契约不可实施.为找到双渠道供应链可实施的协调策略,提出了带固定补偿的收益共享契约的设计方法和用纳什讨价还价协商模型确定固定补偿的方法.结果表明,该契约的协调度等于1,并且相对于批发价契约能同时改善零售商和生产商的利润.另外,研究还表明:生产不经济的弹性系数与销售价格成正比、与供应链的整体利润成反比,并且不同渠道间的竞争越激烈,双渠道供应链的销售价格和需求反而越高,双渠道供应链的总利润也越高,并且,带固定补偿的收益共享契约同样可以协调线性成本下的双渠道供应链.最后用算例验证了本文结论的正确性和有效性.     

考虑再谈判的网上服务采购多属性拍卖研究

针对在线服务外包，研究了供应商投标服务方案（体现服务质量）和价格的买方决定制多属性采购拍卖，分析了交易双方关于服务内容的再谈判对供应商投标均衡、买方初始服务内容决策和各方期望利润的影响。结果表明，无再谈判情形下，供应商的服务质量投标均衡和信息租金都随初始服务内容递增；而有再谈判情形下，尽管买方对服务质量的评标权重随初始服务内容递增，但供应商服务质量、信息租金及买方期望利润都不受初始服务内容影响。换言之，初始服务内容对采购项目的规制作用被再谈判完全替代。不仅如此，相较于无再谈判情形，再谈判的存在能够激励供应商提供更高的服务质量，并促成更多的服务内容成交，最终使买方、获胜供应商和交易平台都获得更高期望利润。     

买方市场时效性产品的供应链弹性契约优化模型

在买方市场环境下,产品越来越具有时效性,寿命周期越来越短,为了规避风险,经销商往往不以实际预测量来订货。针对该问题,本文在已有的数量弹性契约研究的基础上,以激励相容理论和供应链理论为理念,引入回购契约的方法,提出了一个可以激励经销商的弹性契约优化模型,弥补了弹性契约的不足。用一个算例分析检验了该模型,结果表明,通过调节批发价格和返利比例来引导经销商的订货量趋势,当经销商期望利润最大的订货量与市场平均需求相等时,经销商会客观地估测未来需求量并报给制造商,同时制造商还在此基础上确定具体批发价格和返利比例以使自己利润最大化,从而使经销商与制造商共担供应链环节中的市场风险,并共同为优化整体供应链做出努力。     

基于收益共享契约的供应链质量控制与协调机制

研究了单个供应商和单个零售商构成的供应链中,零售商采用收益共享契约对供应链成员质量控制决策的协调作用。分析了使用收益共享契约、供应商与零售商合作、使用批发价格契约三种情况下供应链成员的博弈均衡,并进一步通过比较讨论了收益共享契约对于供应链成员质量控制的优势和局限。研究表明,当销售量的变化对产品质量改进的敏感程度较高时,收益共享契约的协调效果较好,但对于零售商来说,虽然其利润高于采用批发价格契约,可利润份额却有所下降,这意味着收益共享契约对供应商更有利。     

Quantity Flexibility Contract in the Presence of Discount Incentive

We design a new contract, which we refer to as the QFi contract, that combines the quantity flexibility (QF) mechanism and the price‐only discount incentive. Under the QF contract, the buyer does not assume full responsibility for the forecast, yet the supplier guarantees the availability of the forecasted quantity and extra buffer inventory. In contrast, the price‐only discount contract places full inventory burden on the buyer. We show that the proposed QFi contract effectively balances the inventory risk for both the buyer and the supplier considering both the QF and discount mechanisms. We also show that the QFi contract is able to achieve supply chain coordination. More importantly, the QFi contract's coordinating price scheme does not require knowledge of demand distribution. We identify areas where the buyer and supplier may both benefit from implementing the QFi contract as opposed to the extant QF or price‐only (wholesale) discount contractual decisions in a decentralized supply chain. We also specify the conditions under which supply chain coordination can be achieved in a win‐win manner. We conclude with managerial implications and provide directions for future research.     

Should an OEM Retain Component Procurement when the CM Produces Competing Products?

We consider a large original equipment manufacturer (OEM) who relies on a contract manufacturer (CM) to produce her product. In addition to the OEM's product, the CM also produces for a smaller OEM. Both the larger OEM and the CM can purchase the component from the supplier, but their purchase prices may differ and remain unknown to each other. The main question we address is whether the larger OEM should retain component procurement by purchasing components from the supplier and reselling to the CM (buy–sell), or outsource component procurement by letting the CM purchase directly from the supplier (turnkey). We show that, under buy–sell, the larger OEM's optimal strategy is to resell components at the highest possible component purchase price of the CM (i.e., the street price). By comparing buy–sell and turnkey, we find that a CM with low component price is better off under turnkey, even though under buy–sell he receives more profits through the products sold to the smaller OEM. Furthermore, the larger OEM's preference between buy–sell and turnkey depends on her component price, the volatility of the CM's component price and substitutability between the two products.     

The Impact of Contracts and Competition on Upstream Innovation in a Supply Chain

We consider a supply chain with an upstream supplier who invests in innovation and a downstream manufacturer who sells to consumers. We study the impact of supply chain contracts with endogenous upstream innovation, focusing on three different contract scenarios: (i) a wholesale price contract, (ii) a quality‐dependent wholesale price contract, and (iii) a revenue‐sharing contract. We confirm that the revenue‐sharing contract can coordinate supply chain decisions including the innovation investment, whereas the other two contracts may result in underinvestment in innovation. However, the downstream manufacturer does not always prefer the revenue‐sharing contract; the manufacturer's profit can be higher with a quality‐dependent wholesale price contract than with a revenue‐sharing contract, specifically when the upstream supplier's innovation cost is low. We then extend our model to incorporate upstream competition between suppliers. By inviting upstream competition, with the wholesale price contract, the manufacturer can increase his profit substantially. Furthermore, under upstream competition, the revenue‐sharing contract coordinates the supply chain, and results in an optimal contract form for the manufacturer when suppliers are symmetric. We also analyze the case of complementary components suppliers, and show that most of our results are robust.     

Technical Note—Demand Uncertainty Reduction in Decentralized Supply Chains

This note analyzes the effects associated with reducing demand uncertainty in a decentralized supply chain comprising one manufacturer, one retailer, and a wholesale price contract that governs the transactions between them. The demand uncertainty level is parameterized through a mean‐preserving spread, and the manufacturer's and the retailer's equilibrium decisions are solved accordingly. We consider the case of an exogenous retail price as well as the case of an endogenous retail price, and we find in both cases that the manufacturer's and the retailer's expected profits in equilibrium are not necessarily monotone decreasing in the uncertainty level. Thus, we find that, even if the cost of reducing demand uncertainty is zero, uncertainty reduction can hurt rather than benefit either or both members of the supply chain.     

考虑资金收益情况下的供应链回购契约

在制造商的资金收益率大于零售商资金收益率的情况下,以报童模型为基础,研究了资金收益对回购契约的影响.系统预期利润变为与批发价相关,利用拉格朗日方程求解了满足零售商参与约束、同时使系统和制造商预期利润取得最大值的契约参数.与不考虑资金收益情况下的供应链协调不同的是:订货批量大于相应批发价下不考虑零售商参与约束的最优订货批量;若零售商的保留利润一定,则回购价增大;回购价可以大于批发价,批发价可以小于制造商的边际生产成本.     

Revenue‐Sharing vs. Wholesale‐Price Contracts in Assembly Systems with Random Demand

Assembly and kitting operations, as well as jointly sold products, are rather basic yet intriguing A decentralized supply chains, where achieving coordination through appropriate incentives is very important, especially when demand is uncertain. We investigate two very distinct types of arrangements between an assembler/retailer and its suppliers. One scheme is a vendor‐managed inventory with revenue sharing, and the other a wholesale‐price driven contract. In the VMI case, each supplier faces strategic uncertainty as to the amounts of components, which need to be mated with its own, that other suppliers will deliver. We explore the resulting components' delivery quantities equilibrium in this decentralized supply chain and its implications for participants' and system's expected profits. We derive the revenue shares the assembler should select in order to maximize its own profits. We then explore a revenue‐plus‐surplus‐subsidy incentive scheme, where, in addition to a share of revenue, the assembler also provides a subsidy to component suppliers for their unsold components. We show that, by using this two‐parameter contract, the assembler can achieve channel coordination and increase the profits of all parties involved. We then explore a wholesale‐price‐driven scheme, both as a single lever and in combination with buybacks. The channel performance of a wholesale‐price‐only scheme is shown to degrade with the number of suppliers, which is not the case with a revenue‐share‐only contract.     

Outsourcing to a Powerful Contract Manufacturer: The Effect of Learning‐by‐Doing

The contract manufacturing industry has grown rapidly in recent years as firms have increasingly outsourced production to reduce costs. This growth has created powerful contract manufacturers (CMs) in several industries. Achieving a competitive cost position is often a primary motive for outsourcing. Outsourcing influences both the original equipment manufacturer's (OEM) and the CM's production levels, and, therefore, through learning‐by‐doing renders future costs dependent on past outsourcing decisions. As such, outsourcing should not be viewed as a static decision that, once made, is not revisited. We address these considerations by analyzing a two‐period game between an OEM and a powerful CM wherein both firms can reduce their production costs through learning‐by‐doing. We find that partial outsourcing, wherein the OEM simultaneously outsources and produces in‐house, can be an optimal strategy. Also, we find that the OEM's outsourcing strategy may be dynamic—i.e., change from period to period. In addition, we find both that the OEM may engage in production for leverage (i.e., produce internally when at a cost disadvantage) and that the CM may engage in low balling. These and other findings in this paper demonstrate the importance of considering learning, the power of the CM, and future periods when making outsourcing decisions.     

Product Line Extensions and Technology Licensing with a Strategic Supplier

In many industries, original equipment manufacturers (OEMs) must obtain critical components from a few powerful suppliers. To the extent that the OEMs are also concentrated, the interactions between the suppliers of critical components and the OEMs are strategic, and have implications for how an incumbent OEM chooses its product line and interacts with potential rivals. We demonstrate that, by adding a low‐end product line extension, an OEM can induce a strategic supplier to offer more favorable pricing. Moreover, depending upon the cost structure and relative performance of the product line extension, the OEM may benefit even more from the low‐end line extension if it is produced by a rival instead of by itself, even if it cannot obtain any licensing income from it. Among other things, we show that this can result in a decentralized OEM accommodating competition from rivals producing product line extensions that would not be developed in a vertically integrated supply chain. In an extension, we re‐examine the common assumption that the supplier unilaterally dictates a single wholesale price that is available to all downstream buyers. We demonstrate that, by committing to offer a “lowest available” wholesale price to all downstream buyers, a supplier can encourage an incumbent OEM to share its technology (or otherwise accommodate the entry of a rival) so that the supplier, the incumbent OEM, and the rival are all better off.