Supply chains have become increasingly complex in the last decade, which makes their structural characteristics important determinants of firm performance. Prior studies on supply chain structure have largely emphasized network-level attributes but ignored supply-base level characteristics. However, in many cases it is the 1 st tier suppliers, not those "deep in the network," that have most immediate influence on the buyer. In addition, some structural characteristics, such as direct links between the buyer's suppliers and its customers, are not-so-visible to the buyer, yet can impact its financial performance dramatically. The existing literature has overlooked these not-so-visible structural links. Using objective supply chain data collected from Mergent Online and Compustat,we map the supply base structure of 867 public firms. We construct three visible (horizontal, vertical and spatial) and two not-so-visible (eliminative and cooperative) structural complexity metrics, and examine their impacts on buyer firms' financial performance as measured by Return on Assets and Tobin's Q. Our empirical analysis shows that the five dimensions have differential effects: some have negligible impacts while others appear to strongly affect financial performance. Contrary to the common belief that complexity hurts performance, we find that an individual complexity dimension may have both positive and negative effects, and the overall effect may be non-linear.
a b s t r a c tMediation as a theory testing approach has witnessed considerable adoption among Operations Management (OM) researchers. Although mediation-testing methods have evolved tremendously in the past decade, their dissemination in the OM field has not seen parallel growth. These advanced techniques facilitate the testing of existing and complex hypotheses in a more precise manner. With the intent of critically evaluating existing and alternative methods for conducting mediation analysis needed to support sophisticated empirical research, this paper first reviews OM studies that tested for mediation in the past eleven years (2002-2012) from top-tier OM journals. Four commonly used mediation approaches were identified. Based on principles of good theory building, type of mediation model, and properties of empirical data, we evaluate the existing methodologies and make recommendations on how to improve the rigor of OM mediation testing. Using published OM studies in top journals as examples, we then illustrate the relevance and advantages of these recommendations, as well as their ease of use. Furthermore, we empirically show that more robust and insightful results can be achieved by adopting these techniques, which in turn have the promise of leading to better theory building and testing in the field of operations management.
Consumer return rates have been steadily rising in recent years, resulting in growing costs for retailers who must manage the returns process and the disposition of returned products. This cost pressure is driven in part by extremely generous return policies, such as giving consumers a full refund upon return. Interestingly, this common retail practice of full refunds is inconsistent with the recommendations of many analytical models of returns, which nearly always show that a partial refund is optimal. Such inconsistencies between theory and practice might arise when the decision drivers included in the analytical models do not match the decision drivers in practice. It might also be the case that retailers are overly optimistic about the value that consumers assign to a full refund, and thus assume that the value of such a policy outweighs its costs. In this paper, we use data collected from eBay, where identical products are sold with different return policies, to investigate these open questions in the literature. We analyze both the return policy drivers from the retailer's perspective and the return policy value from the consumer's perspective. Our results suggest that the value of a full refund policy to consumers may not be as large as one might expect, and it also exhibits a large heterogeneity across buyers with different levels of online purchase experience. In addition, we provide empirical evidence for what has long been suspected by online retailers e that a non-refundable forward shipping charge quickly erodes any value that consumers assign to return policies. The generality of our results is limited by the fact that eBay differs from traditional retail contexts in many respects, including the fact that eBay buyers may not be representative of the general buyer population. However, our study of how eBay consumers value free returns provides new insights into an understudied area, and it can serve as a starting point for future studies of the value of return policies in other retail contexts.
Many retailers offer refunds to consumers who, after a trial period, return a product that they find does not fit their needs. Some consumers are willing to use this return option opportunistically for short‐term consumption rather than its intended purpose of resolving fit uncertainty. Such behavior has been termed “wardrobing.” Restocking fees (partial refunds) can be used to combat wardrobing. However, there is a trade‐off involved, since partial refunds will be viewed negatively by consumers who return an item due to a true lack of fit. In this study, we consider how the extent of wardrobing (how many consumers consider such behavior) and the benefit of wardrobing (how much value can be extracted during the trial) impact firm pricing decisions and profits in this retail context. Our results imply that an increase in the extent of wardrobing is most detrimental to profits when the current extent of wardrobing is low. On the contrary, if the extent of wardrobing is already very high, and the benefit of wardrobing to consumers is also high, the retailer can set prices and refunds such that additional wardrobing actually increases firm profits. In a model extension, we show how a retailer can effectively screen wardrobers from ordinary consumers by offering a menu of price/refund pairs, and that such an approach can lead to increased profits if the extent of wardrobing is sufficiently high. Overall, our findings provide new insights into how retailers can set prices and refund policies to effectively manage opportunistic behavior by consumers.
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