T his research investigates the value of category captainship (a management practice in which a retailer relies on a manufacturer for recommendations regarding strategic category management decisions) in retail supply chains. We consider a setting where the scope of category management is limited to assortment decisions and demand enhancing activities. We assume that the retailer selects a category captain among multiple competing manufacturers with privately known capabilities for driving category traffic. First, we consider a benchmark scenario where the retailer is responsible for category management. Then, we consider the category captainship scenario where the retailer selects one of the manufacturers as a captain to manage the category. We find that captainship is more likely to emerge in categories where the cost of managing variety, the retail margins, and the competition for captainship are moderate and the captain is more capable of driving traffic compared to the retailer. In such categories the collaboration between the retailer and the captain ensures sufficient surplus for both parties. Finally, we show that captainship can also benefit the non-captain manufacturers.
A lthough product modularity is often advocated as a design strategy in the operations management literature, little is known about how consumers respond to modular products. In this research we undertake several experiments to explore consumer response to modularly upgradeable products in settings featuring technological change. We consider both the initial product choice (between a modularly upgradeable product and an integral one) and the subsequent upgrade decision (replacement of a module versus full product replacement). First, we show that consumers tend to discount the cost savings associated with modular upgrades excessively (insufficiently) when the time between the initial purchase and the upgrade is short (long). This suggests that modular upgradability as a product feature has higher profit potential for slowly rather than rapidly improving products. Second, we observe a preference reversal between the initial purchase and the point of upgrade: At the point of initial purchase, people foresee making a full product replacement in the future, yet, when faced with the actual upgrade decision, they are more likely to revert to modular upgrades. Finally, we discuss and test several pricing and product design strategies that the firm can use to respond to these cognitive biases.
I n this paper, we examine the suggested link between product architecture (i.e., the extent to which a product is modular vs. integral) and supply chain configuration (i.e., whether the product development is done internally by the manufacturer in an integrated supply chain or in collaboration with a supplier in a decentralized supply chain). Our model suggests that the choice of product architecture depends on firm, market, and product characteristics in addition to supply chain structure. In contrast to other studies, we find that the optimal mapping from architecture to supply chain structure is not always one-toone. A decentralized supply chain may be associated with a more integral product when the technical collaboration penalty is not excessive and suppliers have significantly superior product development capabilities. Furthermore, in a decentralized supply chain, the nature of the relationship between the original equipment manufacturer and its supplier (adversarial or collaborative) plays a role in the choice of product architecture: modular architectures are more likely when the parties have adversarial relationships, while long-term trust-based relationships facilitate more integral product architectures.
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