Strategic information sharing between competing retailers in a supply chain with endogenous wholesale price

This paper introduces a new motivation for information sharing in decentralized supply chains—as a mechanism to achieve truthful information sharing and to reduce signaling costs. We study a two-echelon supply chain with one manufacturer selling a homogenous product to n price-setting competing retailers. Each retailer has access to private information about the potential market demand, and the retailers have an ex-ante incentive to share this information with each other and to conceal the information from the manufacturer. However, without a mechanism that induces the retailers to truthful information exchange as their strategic choice, no information can be exchanged via pure communication (cheap talk). To overcome this obstacle, two signaling games are analyzed: in the first game, information is shared truthfully among the retailers; in the second game, information is also shared truthfully with the manufacturer. We show that under some conditions sharing information with the manufacturer results in a higher profit for the retailers.     

Structuring and contracting in competing supply chains

This paper considers two competing supply chains, each with multiple upstream suppliers producing complementary products and selling to a single buyer (e.g., assembler or retailer), who then sells the finished assembled product to a market that involves both demand uncertainty and competition. Our main research questions focus on what supply chain structure (integration vs. decentralization) and which contracting strategy a business should choose. We find that supply chains that decentralize perform better under strong market competition (i.e., high degree of product substitution between supply chains). However, when a large number of suppliers exist, supply chains that integrate perform better. When decentralized structures are used for both supply chains, a consignment with revenue sharing contract generally outperforms a wholesale price contract from the downstream retailer's point of view. Interestingly, for a supplier, a wholesale price contract, which pushes all demand risks to the downstream retailer, might not be preferred. For the entire supply chain, one contract strategy can outperform another depending on the degree of competition, the cost share of the buyer, and the number of suppliers.     

Quality improvement in competing supply chains

In this study, we consider quality improvement in a given segment of the market, shared by two supplier-manufacturer supply chains which offer a given product at the same price but compete on quality. The mechanism on the selection of supply chain structures and quality improvement strategies of the two supply chains is described. In particular, we analyze three possible structure combinations: two integrated supply chains, two decentralized supply chains, and one integrated and one decentralized supply chains. Between the supply chains, Nash's non-cooperative game is implemented. Numerical experiments illustrate the mechanism and some related issues are discussed.     

Trade promotion mode choice and information sharing in fashion retail supply chains

Trade promotion has a significant impact on the retail business, particularly in the fashion sectors. Manufacturers have traditionally been concerned with the inefficiency of trade promotion due to the low pass-through rate of the trade deals from retailers to customers. The scan-back (SB) trade deal, which monitors a retailer's sales via an IT system, benefits the manufacturer, but may or may not benefit the retailer. We provide insight into when a retailer in a two-stage supply chain has incentive to accept the SB trade deal. We show that (1) the manufacturer and the entire supply chain can always benefit from the SB trade deal while the retailer benefits only under some conditions, and that (2) both the retailer and the manufacturer can benefit from the SB trade deal if the SB deal is accompanied by a buyback (BB) contract. We examine the effect of a retailer's confidential pass-through rate on both the retailer's and the manufacturer's incentives to use the SB trade deal.     

Interlocking of information systems for international supply and demand chains management

This paper is concerned with coordination aspects of supply chain management and, in particular, investigates setup coordination between two and three stages of a supply chain. The problem arises from a real application in the production chain of a kitchen furniture plant. In different stages of the plant, items are grouped according to different attributes. A setup is required in a stage when the new batch has a different level of attribute from the previous one. Two objectives are considered, i.e., minimizing the total number of setups and minimizing the maximum number of setups of the stages. The problem is to determine a sequence of batches in search for Pareto-optimal solutions with respect to the two objectives. Several metaheuristics, including genetic algorithm, simulated annealing, and iterated local search (ILS) have been proposed for the two-stage problem. In this paper, we develop a constructive heuristic, which combines a least flexibility first principle and a greedy search, for the two- and three-stage problems. Computational results show that the proposed heuristic performs significantly better than the genetic algorithm and simulated annealing. Although the proposed heuristic is inferior to the ILS, which employs two constructive initial solution heuristic, for the two-stage problem, it can be easily extended to the three-stage problem.     

A serial supply chain of newsvendor problem with safety stocks under complete and partial information sharing

We consider a supply chain where multiple members are serially connected. The decision is to determine the ordering quantity of a member to the next upstream member in the supply chain. The basic cost model is similar to the newsvendor problem with additional consideration to safety stock. This paper presents optimal approaches for coordination of the supply chain under both complete and partial information sharing in order to maximize the total expected benefit. For complete information sharing we develop an optimal coordination algorithm. For partial information sharing, we propose an optimal coordination algorithm based on the Alternating Direction Method and the Diagonal Quadratic Approximation Method. A numerical example is discussed to show the optimal convergence of ordering quantities and discuss the properties of the proposed algorithms.     

Knowledge and information flows in supply chains: A study on pharmaceutical companies

A great deal of attention in the supply chain management literature is devoted to study material and demand information flows and their coordination. But in many situations, supply chains may convey information from different nature, they may be an important channel companies have to deliver knowledge, or specifically, technical information to the market. This paper studies the technical flow and highlights its particular requirements. Drawing upon a qualitative field research, it studies pharmaceutical companies, since those companies face a very specific challenge: consumers do not have discretion over their choices, ethical drugs must be prescribed by physicians to be bought and used by final consumers. Technical information flow is rich, and must be redundant and early delivered at multiple points. Thus, apart from the regular material channel where products and order information flow, those companies build a specialized information channel, developed to communicate to those who need it to create demand. Conclusions can be extended to supply chains where products and services are complex and decision makers must be clearly informed about technology-related information.     

Role of forecast effort on supply chain profitability under various information sharing scenarios

In this paper, we consider a manufacturer who sells a product to a retailer in a single selling season. Each party obtains a forecast of the market demand independent of each other. We study three different forecast scenarios: Non-Information Sharing, Information Sharing, and Retailer Forecasting cases. In the first scenario, both parties make their forecasts, but do not share the information with the other firm. In the second scenario, they share the information with each other, while in the last scenario, only the retailer makes the forecast, and shares it with the manufacturer. Noting that the forecast accuracy comes at a cost, we derive the optimal price and forecast accuracy level for each of the three cases. We then compare the optimal policies of the three cases and derive conditions under which the two parties should share information with each other. Results of extensive numerical experimentation are also presented.     

Monitoring global supply chains

Research summary : Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers' conduct. But little is known about what influences auditors' ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains. Managerial summary : Firms reliant on supply chains to manufacture their goods risk reputational harm if the working conditions in those factories are revealed to be dangerous, illegal, or otherwise problematic. While firms are increasingly relying on private‐sector “social auditors” to assess factory conditions, little has been known about the accuracy of those assessments. We analyzed nearly 17,000 code‐of‐conduct audits conducted at nearly 6,000 suppliers around the world. We found that audits yield fewer violations when the audit team has been at that particular supplier before, when audit teams are less experienced or less trained, when audit teams are all male, and when the audits were paid for by the supplier instead of by the buyer. We describe implications for firms relying on social auditors and for auditing firms. Copyright © 2015 John Wiley & Sons, Ltd.     

The role of ERP tools in supply chain information sharing,cooperation, and cost optimization

The transaction based integrated Enterprise Resource Planning (ERP) software provides different tools that can support supply chain integration but at the same time it has several features that obstructs the integration with business partners. We concentrate on the inventory management aspects of supply chain coordination reviewing the recent quantitative modeling and organizational results available in literature. We summarize the results of a detailed numerical and sensitivity analysis based on our previously published models for supply chain cooperation and joint optimal ordering and shipment policies for the buyer and supplier. These results can be used in enterprise software to measure the potential monetary value of policy coordination, to promote cooperation, and minimize the total supply chain system cost. Our further goal is to combine quantitative tools with organizational and management factors, and to integrate them in a multi-level framework of policy coordination.     

Coordination of planning and scheduling decisions in global supply chains with dual supply modes

We address the problem of coordinating aggregate planning decisions and short-term scheduling decisions in supply chains with dual supply modes. We consider long lead time, less expensive sea shipments that are based on demand forecast, and responsive but costly air shipments that are based on revised forecast closer to the demand period. The planning problem determines the sea shipment order quantity and inventory level, while the scheduling model determines the schedule and quantity of air shipments. Results from our numerical experiments suggest that our model leads to consistent cost improvements over a wide range of operating scenarios.     

Price control and advertising in franchising chains

This study investigates how franchising chains use advertising to enhance coordination and improve their control over prices set at franchised outlets. We argue that chains use price advertising to inform customers about their desired prices, thereby influencing franchisees to adopt the advertised prices although they are not contractually required to do so. We test our hypotheses using rich outlet‐level price data collected before and after a U.S. nationwide advertising campaign by McDonald's. Our findings indicate that advertising is an effective mechanism that franchising chains use to improve their control over franchisees, enhance uniformity, and reduce franchisee free‐riding. Copyright © 2013 John Wiley & Sons, Ltd.     

Inventory management with advance supply information

We consider a single stage inventory system with stochastic capacity. The manager receives forecasts from the upstream source about future capacity availability within an information horizon, referred to as “advance supply information”. We study two main questions: (i) How can advance supply information be utilized when making replenishment decisions? (ii) What is the value of such information sharing, compared to a fixed base-stock policy? We show that state-dependent base-stock policies are optimal. We develop easily computable and implementable heuristic policies. We numerically test the accuracy of the approximations and analyze the value of collaboration under various business scenarios.     

A model for supply management of agile manufacturing supply chains

This paper addresses the configuration problem of Manufacturing Supply Chains (MSC) with reference to the supply planning issue. Assuming that the manufacturing system is composed of different stages, we present a technique for the strategic management of the chain addressing supply planning and allowing the improvement of the MSC agility in terms of ability in reconfiguration to meet performance. More in detail, we enhance a previous design method by some of the authors that employs digraph modeling and integer linear programming to optimally design the MSC. The original approach avoids supply chain disruption and stock out and, at the same time, can manage spare parts distribution. In order to take into account the level of demands and maximum production capacities with single/multiple sourcing, in this new formulation we introduce supplier capacity constraints. A case study is presented describing the optimal MSC configuration of an Italian manufacturing firm. The obtained results show that the design method provides managers with key answers to issues related to the supply chain strategic configuration and agility, e.g., choosing the right location for distributors and retailers for enhanced MSC flexibility and performance.     

On leanness, agility and leagile supply chains

In 1999 a paper by Naylor, Naim and Berry on ‘leagility’ was published in international journal of production economics. The paper has attracted over 100 independent citations from over 60 journals of international standing. This paper explores the testing, exploitation and extension of the original work. Via a systematic literature review the notable findings are that the 1999 paper has been exploited in terms of its classification of supply chains into lean, agile and ‘leagile’; those terms have been tested via survey and case based empirical research; has been extended beyond the original stock decoupling point exploitation of lean and agile to encompass other forms of ‘leagility’. This paper concludes that further robust testing of ‘leagility’ and the definitions of leanness and agility are still required to encompass different market sectors and ensure triangulation of research methods.     

Trading reserved capacity independently among supply chains

We propose a novel mechanism for pooling the reserved capacity (super capacity) of different supply chains, so that they can more effectively match their single-period inventory supplies with their demands. Through this mechanism, retailers can buy or sell unutilized super capacity independently as a commodity in a sub-industry before and during the selling season, which helps improve supply flexibility and increase the utilization of suppliers' reserved capacity. Our findings provide a new channel coordination strategy for a group of supply chains to hedge against capacity and inventory risks by trading super capacity with their competitors, which yields individual and aggregate benefits.     

Resale price maintenance for supply chains distributing products with demand uncertainty

This paper explores the economic roles of resale price maintenance (RPM) in supply chains for a specific product, when consumers have taste heterogeneity and the manufacturer faces demand uncertainty. Two transaction schemes within supply chains are compared: (1) RPM, and (2) decentralized pricing in a competitive market environment. With decentralized pricing, a manufacturer loses the incentive to produce a product in categories where the probability that the manufacturer fails to design the product as suitable to public tastes of consumers is high. However, RPM resolves the problem and induces the manufacturer to supply the good, bringing positive surplus to consumers.     

Designing supply chains: Towards theory development

This paper describes a typology for designing supply chains that work in harmony to design, produce, and deliver products with different characteristics and customer expectations. This research discusses supply chain types that are necessary for success across three types of products: standard, innovative, and hybrid. It develops a framework for categorizing the supply chain types according to product characteristics and stage of the product life cycle. The key success factor for a product change as the product moves through its life cycle, and this may require different supply chain characteristics and capabilities. The paper blends literature and theory development with cases study research to create the typology and develop a set of research questions for further investigation.     

NGOs and the creation of value in supply chains

Research Summary: Firms and nongovernmental organizations (NGOs) often collaborate to establish new supply chains. With a formal model, we analyze how NGOs can alleviate market failures and improve supplier economic inclusion while strategically interacting with firms. We account for the specific goals of the NGO and the need to induce collaboration between firms and their suppliers. The analysis reveals a “valley of frustration,” when NGO efforts benefit all actors but only marginally the firm. We also show that more powerful firms might prefer to internalize NGO functions, while firms with lower bargaining power and higher investment requirements are better off collaborating with NGOs. Finally, we study NGOs-firms matching patterns and find that firms with higher bargaining power match with NGOs holding stronger capabilities. Managerial Summary: This article analyzes interactions between firms and nongovernmental organizations (NGOs) aiming to improve the economic inclusion of suppliers or to promote the adoption of specific (e.g., sustainable) practices. For firm executives, this study shows the constraints and benefits associated with working with NGOs, the conditions under which integration of NGO functions is preferable as well as the types of NGOs that offer better prospects for a successful collaboration. For NGO executives, it highlights the need to provide enough economic incentives to firms and suppliers alike to ensure their collaboration and the trade-offs associated with this constraint, in particular, if NGO capabilities are limited. Overall, the study provides a comprehensive understanding of how NGO activities can influence value creation in a vertical value chain.