Modeling Supply Chain Contracts: A Review

Tsay, Andy A.; Nahmias, Steven; Agrawal, Narendra

doi:10.1007/978-1-4615-4949-9_10

Cited by 370 publications

(143 citation statements)

References 39 publications

Supporting

Mentioning

143

Contrasting

Order By: Relevance

“…Reviews of the broader literature on decentralized decision making in supply chains can be found in Tsay et al (1999), Lariviere (1999) and Cachon (2002).…”

Section: Introductionmentioning

confidence: 99%

Decentralized Pricing and Capacity Decisions in a Multitier System with Modular Assembly

Bernstein

DeCroix

2004

Management Science

View full text Add to dashboard Cite

We model a modular assembly system in which a final assembler outsources some of the assembly task to first-tier suppliers (subassemblers), who produce modules made up of multiple components. The assembler sets module prices it will pay to the subassemblers, the subassemblers set component prices they will pay to suppliers, and then all players choose how much capacity to install, with the minimum capacity choice determining system capacity. Finally, stochastic end-product demand is observed and all players produce (and are paid for) the same number of units -the minimum of demand and system capacity.We characterize equilibrium price and capacity choices, and then use that characterization to derive results regarding higher-level structural choices by the assembler -such as how to group components into modules and which suppliers to choose as subassemblers. We also compare performance of the system to a traditional assembly system with an assembler and suppliers but without subassemblers.

show abstract

“…Reviews of the broader literature on decentralized decision making in supply chains can be found in Tsay et al (1999), Lariviere (1999) and Cachon (2002).…”

Section: Introductionmentioning

confidence: 99%

Decentralized Pricing and Capacity Decisions in a Multitier System with Modular Assembly

Bernstein

DeCroix

2004

Management Science

View full text Add to dashboard Cite

show abstract

“…For example, (Ganeshan et al, 1998) provided a taxonomic review of the SCM research in three categories: competitive strategies, firm-focused tactics, and operational efficiency. (Tsay et al, 1998) reviewed the recent literature on supply chain contracts. (Tan, 2001) provided a review of the evolution of the SCM philosophy.…”

Section: Scopementioning

confidence: 99%

Transshipment Problems in Supply ChainSystems: Review and Extensions

Chiou¹

2008

Supply Chain

View full text Add to dashboard Cite

Section: Pricing Schemementioning

confidence: 99%

“…The fact that r is a decision variable for the supplier is different from some of the work in the supply chain contracts literature. Cachon (1998) and Tsay et al (1998) give nice overviews of this literature.To avoid trivialities, we assume thatĊ(0) + g + h < 0 <Ċ(b) + g + h, which means that if the standard deviation of the customer demand is b (or 0), then the total marginal benefit of the supplier and the customer from reducing the standard deviation of the customer demand is greater (or less) than 0. In this case, noting that the total system cost function is [g x − p] + [C(x) + h x + p], the derivative of the total system cost function is strictly negative at x = 0 and strictly positive at x = b.…”

mentioning

confidence: 99%

Price discounts in exchange for reduced customer demand variability and applications to advance demand information acquisition

Kunnumkal

Topaloğlu

2008

International Journal of Production Economics

View full text Add to dashboard Cite

We consider a supplier and a customer operating under a service agreement that requires the supplier to cover the random customer demand with high probability. To fulfill the service agreement, the supplier carries a certain amount of safety stock. The customer has some bearing on its demand variability, possibly through activities such as acquiring advance demand information, employing more sophisticated forecasting techniques or smoothing its product consumption, but these activities bring an extra cost to the customer. Since a reduction in the customer demand variability helps the supplier reduce its safety stock, the supplier is willing to offer a price discount in exchange for reduced demand variability. We examine a pricing scheme where the supplier assesses its potential cost savings from a reduction in the customer demand variability and returns a fraction of these cost savings back to the customer through a price discount. We show that both parties realize cost savings under such a pricing scheme, examine the efficiency issues and consider the case where the customer does not reveal certain cost components accurately.Although conventional inventory models treat the customer demand as an exogenous random process, there are many situations where the customer can affect certain aspects of its demand process through activities such as acquiring advance demand information, employing more sophisticated forecasting techniques or smoothing its product consumption. Essentially, the outcome of these activities is to reduce the customer demand variability, which, in turn, benefits the customer through increased fill rates and the supplier through reduced inventories. However, although both the supplier and the customer benefit from these activities, the costs associated with them are usually born only by the customer. Consequently, the customer may pursue these activities in a much more limited scope than the supplier desires, and the supplier may have to share the costs of these activities with the customer or provide other incentives.In this paper, we consider a supplier and a customer operating under a service agreement that requires the supplier to cover the random customer demand in each time period with high probability.The customer has some bearing on its demand variability, but this requires the customer to incur an extra cost. Early in the paper, we do not explicitly specify how the customer can affect its demand variability, but we later give a specific example where the customer can do this through advance demand information acquisition. A reduction in the customer demand variability helps the supplier reduce the safety stock that it needs to fulfill the service agreement, and the supplier is willing to offer a price discount to motivate the customer. We propose a pricing scheme that is motivated by the idea that the supplier should return a fraction of its potential cost savings that can be realized by the reduction in the demand variability back to the customer through a price discount. The re...

show abstract

Modeling Supply Chain Contracts: A Review

Cited by 370 publications

References 39 publications

Decentralized Pricing and Capacity Decisions in a Multitier System with Modular Assembly

Decentralized Pricing and Capacity Decisions in a Multitier System with Modular Assembly

Transshipment Problems in Supply ChainSystems: Review and Extensions

Price discounts in exchange for reduced customer demand variability and applications to advance demand information acquisition

Contact Info

Product

Resources

About