Options Contracts with Overbooking in the Air Cargo Industry

In today's world economy, which is marked by intensified international trade, air cargo acts as a key facilitator. However, cargo airlines continue to struggle to be profitable because of very high asset costs and substantial demand uncertainty. To improve upon this situation, we propose an options contract. Our model captures the main features of cargo trade between an airline and a freight forwarder and allows us to derive an optimal reservation policy. We then go on to analyze the impact of overbooking on the profit of the cargo capacity provider. The model is subsequently applied to real‐life booking data provided by a major cargo carrier. This enables us to compare current contractual arrangements with the ones proven optimal in the model. A numerical study provides insights about the impact of overbooking on contract parameters and profitability. Managerial insights to be drawn conclude this study.     

Stages of Supply Chain Disruption Response: Direct,Constraining, and Mediating Factors for Impact Mitigation

It is well established that supply chain disruptions can have a severe negative impact on firms and general wisdom suggests that this impact can be mitigated by quick responses. Aside from a few anecdotes, however, little is known about the decision‐making process that leads to speedy responses and about its impeding and supporting antecedents. Using the organizational information‐processing perspective, this empirical study unravels the disruption management process along a sequence of four stages—disruption recognition, disruption diagnosis, response development, and response implementation—and hypothesizes constraining and mediating effects of these stages. The findings contribute to an improved understanding of the role that the decision stages play in mitigating supply chain disruptions, and confirm the prediction that the speed with which information is processed and the stages are worked through positively affects supply chain performance. In addition, the findings suggest that one of the stages, diagnosis, acts as a constraining factor to the other stages. The stages also play a mediating role between the impact that the disruption has and a firm's readiness (prior to a disruption), dependence on a key supplier, and supply chain complexity. This provides guidance to decision makers in the application of resources both prior to a negative event and during a disruption recovery.     

Equity‐Based Incentives and Supply Chain Buy‐Back Contracts*

We analyze the effect of equity‐based incentives in a supply chain with a downstream firm and an upstream supplier. By using the operational decision as a signal to influence external investors’ beliefs, the downstream firm's manager intends to maximize a convex combination of the interim share price and the terminal cash flows. We show that equity‐based incentives create a side effect. Specifically, with a universal buy‐back contract, the deadweight loss of signaling induced by equity‐based incentives could spread throughout the supply chain and cause chain‐wide damages. To mitigate such undesirable consequences, we propose a new mechanism to eliminate the inefficiency. We derive the optimal mechanism that maximizes the downstream firm's profits subject to the constraint that the supply chain efficiency is not undermined. In contrast to the full‐information benchmark, this mechanism gives positive surplus to the supplier. [Submitted: January 5, 2011. Revisions received: June 20, 2011; December 11, 2011. Accepted: December 22, 2011.]     

Role of Random Capacity Risk and the Retailer in Decentralized Supply Chains with Competing Suppliers

This research considers a supply chain under the following conditions: (i) two heterogeneous suppliers are in competition, (ii) supply capacity is random and pricing is endogenous, (iii) consumer demand, with and without an intermediate retailer, is price dependent. Specifically, we examine how uncertainty in supply capacity affects optimal ordering and pricing decisions, supplier and retailer profits, and the incentives to reduce such uncertainty. When two suppliers sell through a monopolistic retailer, supply uncertainty not only affects the retailer's diversification strategy for replenishment, but also changes the suppliers’ wholesale price competition and the incentive for reducing capacity uncertainty. In this dual‐sourcing model, we show that the benefit of reducing capacity uncertainty depends on the cost heterogeneity between the suppliers. In addition, we show that a supplier does not necessarily benefit from capacity variability reduction. We contrast this incentive misalignment with findings from the single‐supplier case and a supplier‐duopoly case where both suppliers sell directly to market without the monopolistic retailer. In the latter single‐supplier and duopoly cases, we prove that the unreliable supplier always benefits from reducing capacity variability. These results highlight the role of the retailer's diversification strategy in distorting a supplier's incentive for reducing capacity uncertainty under supplier price competition.     

Asymmetric Forecast Information and the Value of Demand Observation in Repeated Procurement

In many supply chain relationships that continue over multiple periods, information about the hidden properties of the supply chain partners can be revealed throughout the course of the relationship. This article examines how the availability of such information affects the contracting scheme between a supplier and his manufacturer in a relationship that persists over several selling seasons. At the beginning of the first selling season, the manufacturer observes private information about the demand distribution, whereas the supplier who is less familiar with the market is endowed only with a prior belief about the market condition. When the supplier cannot observe the demand realization during the first selling period, she offers a contract that induces the manufacturer to reveal the market condition in the first selling season. However, the opportunity for the supplier to observe demand realization can result in the supplier offering the manufacturer a simple contract that does not induce the manufacturer to reveal his private information during the first selling season. In the latter case, the supplier observes the demand realization and designs the second period contract based on this information. We show that when the supplier chooses to offer such a contract, the manufacturer becomes worse‐off, and it has an ambiguous effect on the performance of the supply chain.     

Risk Mitigation Benefit from Backup Suppliers in the Presence of the Horizontal Fairness Concern

The backup supply strategy is demonstrated as an effective approach to mitigating supply risk. We study a supply chain in which a leader manufacturer designs a contract to a potential backup supplier to mitigate the yield uncertainty of the primary supplier. In this context, the backup supplier may compare with the primary supplier and have horizontal fairness concerns. We model the contract design problem using a Stackelberg game and characterize the optimal decisions for the manufacturer and backup supplier, in both fairness and off‐fairness settings. The theoretical results show that the leader manufacturer must sacrifice his own payoff to balance the payoffs of both suppliers. As a result, using a self‐interested backup supplier is the dominating strategy, whereas using a fair‐minded backup supplier is only suggested when the reliability of the primary supplier is low and the fairness concern of the backup supplier is not strong. Additionally, the backup supplier only benefits from fairness concerns when the level is not exceeding a threshold value. With regard to high fairness levels beyond this threshold, fairness concern has negative effects on the monetary payoff and even might lead to loss of the business. By conducting laboratory experiments, we provide evidence of the horizontal fairness concern from the backup supplier. Further, we show that if the primary supplier also has horizontal fairness concerns, the leader manufacturer can conditionally benefit from a promoted yield reliability due to an extra effort from the primary supplier.     

Local Resources and Procurement Practices in Humanitarian Supply Chains: An Empirical Examination of Large‐Scale House Reconstruction Projects

Different procurement decisions taken by relief organizations can result in considerably different implications in regards to transport, storage, and distribution of humanitarian aid and ultimately can influence the performance of the humanitarian supply chain and the delivery of the humanitarian aid. In this article, we look into what resources are needed and how these resources evolve in the delivery of humanitarian aid. Drawing on the resource‐based view of the firm, we develop a framework to categorize the impact of local resources on the configuration of humanitarian supply chains. In contrast to other papers, the importance of localizing the configuration of the humanitarian supply chain is not only conceptually recognized, but empirical investigations are also provided. In terms of methodology, this article is based on the analysis of secondary data from two housing reconstruction projects. Findings indicate that the use of local resources in humanitarian aid has positive effects on programs’ overall supply chain performance and these effects are not only related to the macroeconomic perspective, but benefits expand to improvements related to the use of knowledge. At the same time, it was found that local sourcing often comes with a number of problems. For example, in one of the cases, significant problems existed, which were related to the scarcity of local supplies. Both housing reconstruction projects have indicated the continuous need for changes throughout the programs as a dynamic supply chain configuration is important for the long‐term sustainability of reconstruction aid.     

Push and Pull Contracts in a Local Supply Chain with an Outside Market*

Wholesale price contracts are widely studied in a single supplier‐single retailer supply chain, but without considering an outside market where the supplier may sell if he gets a high enough price and the retailer may buy if the price is low enough. We fill this gap in the literature by studying push and pull contracts in a local supplier–retailer supply chain with the presence of an outside market. Taking the local supplier's maximum production capacity and the outside market barriers into account, we identify the Pareto set of the push and/or pull contracts and draw managerial implications. The main results include the following. First, the most inefficient point of the pull Pareto set cannot always be removed by considering both the push and pull contracts. Second, the supplier's production capacity plays a significant role in the presence of an outside market; it affects the supplier's negotiating power with the retailer and the coordination of the supply chain can be accomplished only with a large enough capacity. Third, the import and export barriers influence the supply chain significantly: (i) an export barrier in the local market and the supplier's production capacity influence the supplier's export strategy; (ii) a low import (resp., export) barrier in the local market can improve the local supply chain's efficiency by use of a push (resp., pull) contract; and (iii) a high import (resp., export) barrier in the local market encourages the supplier (resp., retailer) to bear more inventory risk.     

信息技术对价格信息不对称的影响研究

信息技术降低了企业和客户获取信息的成本,从而对价格信息不对称产生影响。本文从客户搜索产品价格信息的角度,分别对四种市场进行分析,得出了在短期市场中,考虑IT影响时信息不对称降低、客户获得较低价格的结论;长期市场中,考虑IT影响时,信息不对称消失、市场演变为完全竞争市场的结论。最后,给出企业制定价格策略的建议。     

制造商流程改进与采购合同联合优化

如何降低供应风险是供应链管理中的热点问题。本文考虑供应商拥有关于初始可靠性的私有信息,且制造商流程改进可提高初始可靠性,运用委托代理理论,研究了制造商流程改进和采购策略联合优化下的最优合同设计。通过对比对称和不对称信息下制造商的最优采购合同,发现信息不对称的存在降低了制造商向低初始可靠性供应商订货的概率,还可能导致过度努力。信息不对称的存在不一定造成社会福利损失,也不一定产生信息租金。当供应商的初始可靠性水平和纳什谈判力满足一定条件时,相比与制造商的最优采购合同,供应商披露私有信息会使供应链实现帕累托改进。最后通过算例验证了模型的结论。本文对供应风险下的采购实践有很好的参考价值和指导意义。     

应急期间服务运作系统能力的采购和恢复模型

分析了大型服务运作系统应急期间的能力应急管理模式,围绕系统内部能力恢复和外部能力采购,综合考虑社会惩罚成本,以应急期间的总成本最小为目标构建了相应的数学模型。通过数值仿真得到4个重要的管理学结论,对社会管理部门的应急政策制定以及运作系统本身在应急期间的科学决策均具有重要的指导意义。     

Supply Chain Disruptions and the Role of Information Asymmetry

This research investigates how information asymmetry between the firm and its investors can influence supply chain disruptions. In such settings, these actors may be induced to take steps which exacerbate rather than ameliorate both the likelihood and impact of disruptions. By better understanding these mechanisms, managers and investors alike are better armed to avoid the costly consequences.     

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.     

A Framework for Examining the Interface between Operations and Information Systems: Implications for Research in the New Millennium*

Even though much research has been published in operations and information systems, both functional areas find their roots in other disciplines. While operations management evolved from operations research in the 1960s, the field of information systems is of more recent vintage and traces its original roots to computer science. Both disciplines now naturally have come closer together as information and process-technology-based changes force manufacturing firms to become more efficient and customer focused. Market and technology-driven e-commerce initiatives that are likely to dominate business strategies in the future cannot be successfully achieved without a successful integration of operations and information systems. In this paper, we present a unifying framework that can be used to better understand the management of the functional interface between operations and information systems. We also categorize and highlight the contributions of the articles that appear in this special research focus issue. Finally, research directions that emerge from our understanding of this interface are outlined in an effort to stimulate further thinking and research that can advance our knowledge of this interface area.     

Optimal procurement of long-term contracts in the presence of imperfect spot market

B2B spot market has grown rapidly and become an effective trading channel for commodity products. Besides long-term contract procurement from conventional suppliers (forward and option), a buyer can procure or sell commodities at any time in B2B spot market to adjust her inventory level. However, spot prices are generally volatile and the market is imperfect in the sense that spot trading may be realized with uncertainty in a given period of time and often comes with extra transaction cost. This paper considers a commodity buyer who can order forward and option contracts in advance and trade in a B2B spot market when spot price and demand are observed stochastically. Based on a single-period newsvendor model, we discuss three optimal order strategies and derive respective expected profits when the buyer is risk-neutral. The sensitivity of purchase costs, market liquidity and transaction cost is investigated. We also compare the optimal expected profits for different strategies to illustrate the effects of the two long-term contracts in the presence of the B2B spot market. We then extend our model to a multi-period setting and derive the optimal strategy. Finally, we numerically compute the optimal order strategy for a risk-averse buyer and analyze the impact of spot market, risk aversion, as well as the correlation between customer demand and spot price.     

Managing Invasive Species in the Presence of Endogenous Technological Change with Uncertainty

This research incorporates the development and adoption of an induced technology under uncertainty into a conceptual dynamic model to more broadly examine efficient policies for mitigating invasive species infestations. We find that under optimal policy, marginal costs of adopting conventional control measures are equal to the sum of the marginal benefits from development and adoption of new technology, as well as the use of conventional control measures. This result implies that a resource allocation designed for controlling invasive species is not adequate when an induced technology is not considered. Our results also reveal that the shadow values associated with the probabilities of developing and then adopting an induced technology increase as the shadow values associated with the stock of an invasive species population increase.     

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.     

Trust and Risk Communication in High-Risk Organizations: A Test of Principles from Social Risk Research

This study explored the effects of open communication about occupational risks on workers' trust beliefs and trust intentions toward risk management, and the resilience of these beliefs and intentions to further risk information. An experimental survey of 393 student nurses showed the importance of open communication in the development of worker trust in risk management. Consistent with the trust asymmetry principle, we found that the increase in trust beliefs following open communication was weaker than the reduction in trust following a lack of communication. Further, the level of trust developed through communication (or lack of) influenced the way that subsequent risk information was processed. Negative risk information reduced trust beliefs in nurses with already low levels of trust while positive risk information increased trust beliefs only in those with already high levels. A similar pattern of results emerged for nurses' trust intentions, although the magnitude of these effects was weaker. The implications of these findings for occupational risk management are discussed.     

基于绩效的产品维修服务合同最优设计与比较分析——考虑零部件过期的影响

基于绩效的合同 (Performance-based Contracts-PBC) 是近年来在产品售后维修服务领域出现的全新商业模式。PBC 改变了传统上供应商通过提供维修活动和销售零件获取收益的方式,将供应商最终实现的产品可用率作为客户付款的标准。在 PBC 模式下,供应商以提高产品可用率为目标,其运营管理决策需要重新审视。备件库存对维修服务十分重要,直接影响故障修复时间。而零部件过期会影响备件库存的正常补货,降低产品可用率。本文基于 Stackelberg 博弈框架,建立了两种不同惩罚机制PBC合同的供应链动态博弈模型,得出了供应商的最优合同设计方案和用户的最优产品订购批量,分析了博弈均衡策略之间的相互作用,探讨了备件过期应对策略对供应链成员最优利润的影响。结果表明,不同的惩罚机制会对供应链成员的决策产生不同的影响。相对于基于备件缺货数量的惩罚机制,基于用户停机损失的惩罚机制对供应商提高产品可用率具有更加强烈的激励效应。然而,这种惩罚机制会导致供应商对备件库存过度投资,并减少用户的产品购买数量,进而会降低供应链成员的最优利润。同时,一个有意思的结果是在基于备件缺货数量的惩罚机制下,供应链均衡状态中惩罚金额与批发价格有联动特征,使得罚金的大小不会对产品订单数量和备件库存数量产生单独的影响。