Strategic commitment to price to stimulate downstream innovation in a supply chain

Gilbert, Stephen M.; Cvsa, Viswanath

doi:10.1016/s0377-2217(02)00590-8

Cited by 212 publications

(99 citation statements)

References 20 publications

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“…Chen [7] provides a comprehensive review of this research stream from the operations management literature. Another group of researchers study combinations of the aforementioned factors, albeit not all three together [9,17,21,23,30]. By modeling and studying the three factors simultaneously, we quantify their joint effects on profits and resulting product quality.…”

Section: Literature Reviewmentioning

confidence: 99%

Quality risk in outsourcing: Noncontractible product quality and private quality cost information

Kaya

Özer

2009

Naval Research Logistics

169

105

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This article addresses the concept of quality risk in outsourcing. Recent trends in outsourcing extend a contract manufacturer's (CM's) responsibility to several functional areas, such as research and development and design in addition to manufacturing. This trend enables an original equipment manufacturer (OEM) to focus on sales and pricing of its product. However, increasing CM responsibilities also suggest that the OEM's product quality is mainly determined by its CM. We identify two factors that cause quality risk in this outsourcing relationship. First, the CM and the OEM may not be able to contract on quality; second, the OEM may not know the cost of quality to the CM. We characterize the effects of these two quality risk factors on the firms' profits and on the resulting product quality. We determine how the OEM's pricing strategy affects quality risk. We show, for example, that the effect of noncontractible quality is higher than the effect of private quality cost information when the OEM sets the sales price after observing the product's quality. We also show that committing to a sales price mitigates the adverse effect of quality risk. To obtain these results, we develop and analyze a three-stage decision model. This model is also used to understand the impact of recent information technologies on profits and product quality. For example, we provide a decision tree that an OEM can use in deciding whether to invest in an enterprise-wide quality management system that enables accounting of quality-related activities across the supply chain.

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Section: Literature Reviewmentioning

confidence: 99%

Quality risk in outsourcing: Noncontractible product quality and private quality cost information

Kaya

Özer

2009

Naval Research Logistics

169

105

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“…The contribution of technological innovation to enterprises or supply chain can be divided into: new product development, quality improvement, and cost reduction. Gilbert and Cvas point out that through collaboration on technological innovation between enterprises in supply chain, the production cost of the whole supply chain can be reduced (Gilbert & Cvas, 2003).Collaborative technological innovation may not necessarily lead to innovation, but with the cost saving effect. In other words, collaboration on technological innovation in supply Chain may not enhance the innovation ability, but can make the enterprises innovate at a lower cost (Schilling & Phelps, 2007).…”

Section: Collaborative Supply Chain Technological Innovationmentioning

confidence: 99%

Efficiency of the supply chain collaborative technological innovation in China: An empirical study based on DEA analysis

Zhang

2015

JIEM

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“…(3) characterizes the total profit of the retailer from i q  product units. We assume that service level cost function of retailer i is 2 2 i i s  ; that is, improving service level has a diminishing effect on service level expenditure (Gilbert & Cvsa, 2003;Tsay & Agrawal, 2000;Xiao & Yang, 2008& 2009Yang et al 2009). Randomness of the market demand involves uncertainty in the profit functions.…”

Section: Vertical and Horizontal Competition (The Basic Model)mentioning

confidence: 99%

Competition of two supply chains with different risk structures: applying market research option

Hafezolkotob¹,

Makui²

2012

ijiec

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Demand uncertainty obliges all participants through a supply chain to make decisions under uncertainty. These decisions extend across price, investment, production, and inventory quantities. We take account of competition between two supply chains under demand uncertainty. These chains internally are involved in vertical pricing competition; however, they externally participate in horizontal pricing and service level competitions by offering a singletype product to the market. Since firms may have various attitudes against demand uncertainty and its related risks, different risk structures for competitive supply chains are considered. We assume that risk-averse firms are able to decrease demand uncertainty by information gathered from market research. For risk-averse participants in a chain, market research investment is an appropriate ground for vertical coordination, which diminishes risk through a supply chain. Optimal strategies based on game theory are obtained for different risk structures; furthermore, for each structure the effects of risk sensitivity as well as market research efficiency on these optimal strategies are investigated. Finally, we propose two scenarios for information sharing between risk-averse participants.

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Strategic commitment to price to stimulate downstream innovation in a supply chain

Cited by 212 publications

References 20 publications

Quality risk in outsourcing: Noncontractible product quality and private quality cost information

Quality risk in outsourcing: Noncontractible product quality and private quality cost information

Efficiency of the supply chain collaborative technological innovation in China: An empirical study based on DEA analysis

Competition of two supply chains with different risk structures: applying market research option

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