Santiago Kraiselburd
DBA in Technology and Operations Management
Dissertation Chair: Prof. A. Raman
Three Essays on Supply Chain Contracts: Impact of Contract Limitations on Inventory and Sales
Retailers and manufacturers face limitations on the kind of contracts they can write for a number of reasons: some variables may not be verifiable in a court of law, writing and enforcing complete contracts is costly, the parties may be boundedly rational, path dependencies an even commercial mores may constraint the options available to the parties. The three essays in this thesis study some of the implications of such limitations.
The first essay analyzes the case when the retailer stocks two competing substitute products: a generic "private label" product, and a branded product, in the presence of non contractible manufacturer efforts. We study a single-period supply chain, consisting of a manufacturer and a retailer, under three different scenarios (when the two firms are integrated into a single entity, when the retailer makes stocking decisions -RMI-, and when the manufacturer makes stocking decisions -VMI). Taking a supply chain wide perspective, we find cases when RMI would perform better than VMI and vice-versa.
The second Essay poses the following question: Is reducing lead times always good for manufacturers? Studying a single-period supply chain consisting of a Manufacturer and a Retailer, we show that in supply chains where retailer effort can substantially affect sales, longer leadtimes can result in higher sales for the manufacturer. Hence, manufacturers might not want to reduce lead times even if it was free to do so.
Finally, the third essay revisits VMI and RMI and takes the retailer's perspective, considering both cases when products have no competitors and when substitution is possible -regardless of whether products are branded or generic-, single and multi-period supply chains, lost sales or backorders, and pose the question: when is VMI good for the retailer? We find that, under certain circumstances, both (a) switching to VMI, and (b) an increase in substitution rates may hurt the retailer.
Rather than focusing on achieving a first best performance -i.e. coordination-, the three essays explore the inherent tradeoffs that contract limitations present, show cases that go against previous established beliefs, and provide insights into when a particular type of contract would be most appropriate.
