Supplier Development and Integration in Competitive Supply Chains

Jin, Yannan; Hu, Qiying; Kim, Sang Won; Zhou, Sean X.

doi:10.1111/poms.12984

Cited by 55 publications

(46 citation statements)

References 33 publications

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“…They showed that the investment strategy of the assembler is either zero or full support. Jin, Hu, Kim, and Zhou (2019) looked at two competing supply chains in which each manufacturer can invest in the cost reduction of its own supplier. They assumed that the manufacturer can integrate with the suppliers and showed that this strategy increases the development investment of manufacturers.…”

Section: Literature Reviewmentioning

confidence: 99%

Investment Strategies in Supplier Development under Capacity and Demand Uncertainty

Golmohammadi

Hassini

2020

Decision Sciences

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We study joint investment by a buyer and a supplier in improving the supplier's capacity using a Stackelberg game model. We analyze both buyer‐led and supplier‐led situations. We show that in both cases the players have an opportunistic behavior toward investment. In the buyer‐led game, when the buyer finds the supplier motivated enough to invest, he avoids any direct contribution on capacity improvement. In this situation, the buyer follows an order inflation strategy to increase the investment of the supplier. However, when the supplier does not show the desire to make enough investment, the buyer will engage in direct investment in the supplier's capacity. We showed that although the order inflation strategy increases the buyer's optimal order quantity, it does not coordinate the supply chain. Also, in the case that the buyer is forced to share the investment costs with the supplier, he relies less on order inflation strategy. In the supplier‐led game, we demonstrated that the buyer has no motivation to use order inflation strategy. In the case that the supplier is the only investor, the buyer‐led game results in a higher profit for the buyer, supplier, and the supply chain. Finally, we looked at two extensions where the supplier is penalized for unsatisfied demand and the buyer uses an order‐postponement strategy.

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Section: Literature Reviewmentioning

confidence: 99%

Investment Strategies in Supplier Development under Capacity and Demand Uncertainty

Golmohammadi

Hassini

2020

Decision Sciences

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“…This feature together with demand correlation allows us to derive managerial insights Qi, Ahn, and Sinha: Capacity Reservation in a Shared Supplier Production and Operations Management 28(11), pp. 2823-2840, © 2019 regarding the practices in using the different reservation contracts.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Whent [ að1 À bÞ 1 À ab , the outcome is similar with the upper left region (0, 2H) replaced by (L, 2HÀL).Qi, Ahn, and Sinha: Capacity Reservation in a Shared SupplierProduction and Operations Management 28(11), pp. 2823-2840, © 2019 Production and Operations Management Society (iii) whenĉ e ðc t ; b;tÞ \ c e ,…”

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To Share or Not to Share? Capacity Reservation in a Shared Supplier

Ahn

Sinha

2019

Production and Operations Management

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When a supplier serves multiple buyers, the buyers often reserve the supplier's capacity in advance to secure the supply to fulfill their demand. In this study, we analyze two common types of capacity reservation: exclusive and first‐priority reservations. Both reservations give a buyer first access to its reserved capacity, but the reservations differ in how the leftovers (if any) are used. In most cases, as long as the buyer gets to use the reserved capacity first, it does not pay attention to how the leftover capacity is utilized, leaving that to the supplier's discretion (first‐priority). However, in a number of cases, buyers prohibit discretionary use of the reserved capacity (“no one touches my leftovers”) and implement the restriction by placing an employee at the supplier or installing monitoring devices (exclusive). One potential benefit of first‐priority capacity is resource pooling: allowing access to one another's leftovers can reduce the amount of capacity reserved by the buyers while enabling the supplier to satisfy buyers’ orders better in some cases. The Operations Management literature suggests that the benefit of resource pooling is greater when the demand correlation is negative and smaller when the correlation is positive. We investigate the capacity reservation type and level that each buyer chooses facing uncertain (and correlated) demand. We investigate how the reservation price and demand correlation affect the equilibrium outcome. We also examine the supplier's decision to set the optimal reservation prices. We find that at least one firm reserves first‐priority capacity in equilibrium as long as the supplier offers a discount for first‐priority capacity (or charges a premium for exclusive capacity). Depending on the reservation price difference and demand correlation, we find that the equilibrium outcome is inefficient (i.e., not Pareto optimal) for the buyers when they settle in a free‐rider or a prisoner's dilemma equilibrium. We show that the supplier always induces both buyers to reserve a large amount of exclusive capacity so that the supplier can make profits from both capacity reservation and production. While this seems like the best scenario for the supplier, we show that, allowing bilateral capacity transfer (e.g., the buyers trading their reserved capacity) can improve not only the buyers’ profits but also the supplier's profit.

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“…Suppliers' cooperation with downstream manufacturers in technology investments is becoming an effective way to improve the performance of the supply chain (Qi et al, 2015;Jin et al, 2019;Liu and Wang, 2019). In the semiconductor industry, when downstream manufacturers launch new products which need a large number of key components, suppliers need to absorb significant technology investments to improve production technology and expand production capacities of key components.…”

Section: Introductionmentioning

confidence: 99%

Supplier’s cooperation strategy with two competing manufacturers under wholesale price discount contract considering technology investment

et al. 2021

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Cooperation between upstream suppliers and downstream manufacturers in technology investment is a popular way to improve production technology for reducing suppliers' production costs of key components. Technology investments undertaken by manufacturers and wholesale price discount contract provided by suppliers have an important impact on their cooperation. This paper explores whether a supplier should cooperate with two downstream competing manufacturers to accept their technology investments to reduce the supplier's production cost of a key component. Specifically, we consider the following three cooperation strategies: the supplier does not accept manufacturers' technology investments, only accepts one manufacturer's technology investment and accepts both manufacturers' technology investments. Our results demonstrate that the wholesale price discount contract and the technology investment can enhance the profits of the supplier and two manufacturers when the discount degree is low. Further, we conclude that when the discount degree is relatively low or when the discount degree and the technology investment efficiency are relatively high, the supplier's optimal cooperation strategy with two manufacturers is to accept both manufacturers' technology invest-

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Supplier Development and Integration in Competitive Supply Chains

Cited by 55 publications

References 33 publications

Investment Strategies in Supplier Development under Capacity and Demand Uncertainty

Investment Strategies in Supplier Development under Capacity and Demand Uncertainty

To Share or Not to Share? Capacity Reservation in a Shared Supplier

Supplier’s cooperation strategy with two competing manufacturers under wholesale price discount contract considering technology investment

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