A change order is frequently initiated by either the supplier or the buyer, especially when the contract is long-term or when the contractual design is complex. In response to a change order, the buyer can enter a bargaining process to negotiate a new price. If the bargaining fails, she pays a cancellation fee (or penalty) and opens an auction. We call this process the sequential bargaining-auc...

We study the supplier relationship choice for a buyer that invests in transferable capacity operated by a supplier. With a long-term relationship, the buyer commits to source from a supplier over a long period of time. With a short-term relationship, the buyer leaves open the option of switching to a new supplier in the future. The buyer has incomplete information about a supplier’s efficiency,...

We consider a single buyer who wishes to outsource a fixed demand for a manufactured good or service at a fixed price to a set of potential suppliers. We examine the value of competition as a mechanism for the buyer to elicit service quality from the suppliers. We compare two approaches the buyer could use to orchestrate this competition: (1) a Supplier-Allocation (SA) approach, which allocates...

This paper examines the relationships between supplier development efforts and buyer competitive advantage from the buyer’s perspective, and seeks to understand how specific supplier development efforts may impact on a buyer’s operational performance. We conducted a survey of 142 electronics manufacturing companies in Hong Kong, and applied structural equation modeling (SEM) to test a structura...

We consider a stochastic inventory control problem in which a buyer makes procurement decisions while facing periodic random demand and two supply sources, namely, a long-term contract supplier and a spot market. The contract between the buyer and the supplier partially shields the latter from the vicissitudes of the spot market, in that the price paid by the buyer to the supplier is only parti...

With globalize market, fast-changing technology and shortening product life cycle, businesses are becoming extremely competitive, and a cooperative buyer–supplier relationship is essential for a manufacturer, especially in technology-related industry, to survive and to acquire reasonable profit. Even though the research on various types of collaborations between firms is abundant, the research ...

Recent cases of product adulteration by foreign suppliers have compelled many manufacturers to re-think approaches to deterring suppliers from cutting corners, especially when manufacturers cannot fully monitor and control the suppliers’ actions. Recognizing that process certification programs, such as ISO9000, do not guarantee unadulterated products and that product liability and product warra...

This paper is focused on the coordination of order and production policy between buyers and suppliers in supply chains. When a buyer and a supplier of an item work independently, the buyer will place orders based on his economic order quantity (EOQ). However, the buyer’s EOQ may not lead to an optimal policy for the supplier. It can be shown that a cooperative batching policy can reduce total c...

C with suppliers prone to default is an increasingly common problem in some industries, particularly automotive manufacturing. We model this phenomenon as a two-period contracting game with two identical suppliers, a single buyer, deterministic demand, and uncertain production costs. The suppliers are distressed at the start of the game and do not have access to external sources of capital; hen...

This study examines the moderating effect of buyer-supplier trust on the relationship between outsourced formal contracts and supplier delivery performance in the domain of public sector procurement. In so doing, we extend the paradigm that formal contracts and relational governance mechanism function as complements rather than substitutes. Using a cross sectional data from a survey of 612 staf...