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E-channel management under vendor-managed inventory by option and conventional contracts: the influence of outsourcing decisions

Ahmadi Nezhad, A. M ; Sharif University of Technology | 2024

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  1. Type of Document: Article
  2. DOI: 10.1080/21681015.2024.2333373
  3. Publisher: 2024
  4. Abstract:
  5. In the era of widespread e-commerce adoption, businesses encounter challenges in managing e-channel demand and production constraints. This study explores an e-channel with an e-retailer with no pattern demand, a primary supplier, and a backup supplier to address these issues through outsourcing. The primary supplier, facing limited production capacity and potential failure, seeks assistance from the backup supplier under a vendor-managed inventory (VMI) strategy. Two contracts, a conventional contract with penalties for rejecting units and an option contract allowing negotiations, are compared. Results indicate that the option contract promotes a win-win scenario, enhancing overall e-channel efficiency and earnings compared to the conventional contract. Negotiations facilitated by the backup supplier contribute to e-channel coordination. However, if the option price exceeds the penalty difference, the conventional contract may be more attractive to the primary supplier. © 2024 Chinese Institute of Industrial Engineers
  6. Keywords:
  7. E-channel coordination ; Outsourcing ; VMI ; Backup suppliers ; Channel coordination ; Channel demand ; Channel management ; E-commerce adoption ; Option contracts ; Outsourcing decisions ; Reliable production ; Vendor managed Inventory ; Outsourcing
  8. Source: Journal of Industrial and Production Engineering ; Volume 41, Issue 5 , 2024 , Pages 456-485 ; 21681015 (ISSN)
  9. URL: https://www.tandfonline.com/doi/abs/10.1080/21681015.2024.2333373