Optimal Contracts for Outsourcing of Repair and Restoration Services

Jain, Nitish; Hasija, Sameer; Popescu, D.

doi:10.2139/ssrn.1924230

Cited by 48 publications

(17 citation statements)

References 21 publications

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“…They provide several interesting insights and suggest that the franchise fee contract can generate a higher profit for the retailer and entice the retailer to offer a higher quality of service. Jain et al (2013) study channel coordination via a performance-based contract when a firm outsources its repair and restoration services to an external service provider. They find that the structures of performance-based contracts significantly affect the optimal channel profit.…”

Section: Accepted Manuscriptmentioning

confidence: 99%

Service supply chain management: A review of operational models

Wang

Wallace

Shen

et al. 2015

European Journal of Operational Research

271

177

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Section: Accepted Manuscriptmentioning

confidence: 99%

Service supply chain management: A review of operational models

Wang

Wallace

Shen

et al. 2015

European Journal of Operational Research

271

177

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“…In operations management, value cocreation arises in manufacturing activities (Buzacott 2004, Gurvich andVan Mieghem 2014), as well as in joint product development (Bhaskaran andKrishnan 2009, Iyer et al 2005), joint detection of defective products (Baiman et al 2000), joint quality investment (Wang and Yin 2014), collaborative cost reduction in supply chains (Corbett and DeCroix 2001, Corbett et al 2005, Kim and Netessine 2013, and repair services (Jain et al 2013). Our abstract representation of joint production steps back from those context-specific studies, which typically consider efforts to be either substitutes or complements, by studying the shift from one to the other in the design of the coproductive system.…”

Section: Analytical Models Of Joint Productionmentioning

confidence: 99%

Optimal Design of Coproductive Services: Interaction and Work Allocation

Roels

2014

M&SOM

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I n services, customers provide significant inputs into the production process. In particular, these inputs may be the customers themselves participating in the service delivery. Although many service firms have explored different ways of involving customers in their production process, there is no clear guideline for the design of such coproductive systems. In this paper, we develop an analytical model of joint production between a service provider and a customer and characterize how a service firm should design its coproductive system. We show that, as a task becomes more standard, it is desirable to decrease the degree of interaction between the provider and the customer by making their efforts more substitutable and to allocate most of the work to whoever is the most efficient. Conversely, as a task becomes less standard, it is optimal to increase interaction by making efforts more complementary and to balance the work allocation. Our analysis gives rise to a service-process framework with three archetypes of coproductive services: collaborative services, service factories, and self-services. We discuss the implications of our results for service process reengineering.

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“…Jain et al. () study the contract design problem with double‐sided moral hazard in which a firm outsources the repair and restoration of its equipment to an external service provider. They show that both linear and tiered contract structures can help the firm achieve the first best profit.…”

Section: Literature Reviewmentioning

confidence: 99%

Service Outsourcing: Capacity, Quality and Correlated Costs

Feng

Ren

Zhang

2019

Production and Operations Management

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This paper studies how to design service outsourcing contracts to ensure fast, quality services from an independent service provider. The outsourcer does not have perfect information about the service provider’s capacity cost (i.e., cost of providing fast service) and quality cost (i.e., cost of achieving a high quality level). Moreover, the two unknown costs may be positively, or negatively, correlated with each other. We solve for the outsourcer’s optimal outsourcing contract, and show that the structure of the optimal contract depends on the relationship between the costs. Specifically, we highlight the following observations when the two costs are negatively correlated: First, under certain conditions, the outsourcer may be able to squeeze the supplier’s profit (information rent) to zero for an intermediate range of cost realizations; second, it is possible that the service supply chain is coordinated by using the outsourcer’s optimal contract. We then examine the performance of two classes of commonly observed contracts that are relatively simple to implement. It has been found that these simple contracts generally perform well when the costs are positively correlated, but they could perform much worse when the costs are negatively correlated. Our results therefore caution outsourcing companies that the potential trade‐off between capacity cost and quality cost may require a careful design of outsourcing contracts.

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Optimal Contracts for Outsourcing of Repair and Restoration Services

Cited by 48 publications

References 21 publications

Service supply chain management: A review of operational models

Service supply chain management: A review of operational models

Optimal Design of Coproductive Services: Interaction and Work Allocation

Service Outsourcing: Capacity, Quality and Correlated Costs

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