Date of Award

August 2018

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Department

Management Science

First Advisor

Xiang Fang

Committee Members

Layth Alwan, Xiaohang Yue, Xiaojing Yang

Keywords

Operations Management, Store Band Competition, Supply Chain Contracting, Supply Uncertainty

Abstract

In today's complex business environment, manufacturers are striving to maintain a competitive advantage over their supply chain partners. Manufacturers' profitability is tightly linked to their strategic interactions with other entities in the supply chain. While numerous studies have been conducted to investigate such interactions in supply chains, certain issues remain unresolved. We apply a game-theoretic framework to analyze two distinct supply chain structures in the presence of supply uncertainty and store brand competition in two essays, respectively.

In the first chapter, we study a decentralized assembly supply chain under supply uncertainty. In a decentralized assembly supply chain, one assembler assembles a set of $n$ components, each produced by a different supplier, into a final product to meet an uncertain market demand. Each supplier faces an uncertain production capacity such that only the lesser of the planned production quantity and the realized capacity can be delivered to the assembler. We assume that the suppliers' random capacities and the random demand can follow an arbitrary continuous multivariate distribution. We formulate the problem as a two-stage Stackelberg game. The assembler and the suppliers adopt a so-called Vendor-Managed-Consigned-Inventory (VMCI) contract. We analytically characterize the equilibrium of this game, based on which we obtain several managerial insights. Surprisingly, we show that when a supplier's production cost increases or when his component salvage value decreases, it hurts all other members and the entire supply chain, but it might sometimes benefit this particular supplier. Similarly, when the suppliers do not have supply uncertainty, it benefits the assembler but it does not necessarily benefit the suppliers. Furthermore, we demonstrate that when the suppliers' capacities become more positively correlated, the assembler is always better off, but the suppliers might be better or worse off. Later in the chapter, we also solve the game under the conventional wholesale-price contract. We find that the assembler always prefers the VMCI contract, and the suppliers always prefer the wholesale price contract. In addition, we illustrate that the VMCI contract is more efficient than the wholesale price contract for this decentralized assembly supply chain.

In the second chapter, we consider a two-tier decentralized supply chain with a national brand supplier and a retailer. The national brand supplier (she) distributes her products to consumers through the retailer. Meanwhile, the retailer (he) intends to develop and produce his own store brand through a manufacturing source that is different from the national brand supplier. The retailer holds the store brand production unit cost as private information, for which the national brand supplier only has a subjective assessment. Given a supply contract offered by the national brand supplier, the retailer simultaneously decides whether to accept the contract and whether to produce the store brand. The national brand supplier aims to design an optimal menu of contracts to maximize her expected profit as well as extract the retailer's private cost information. We formulate the problem as a two-stage screening game to analyze the strategic interaction between the two players. Despite the inherent computational complexity, we are able to derive the optimal menu of contracts for the national brand supplier, of which the format depends on the national brand supplier's unit production cost. Furthermore, we investigate how the model parameters affect the value of information for each member in the supply chain. We show that the retailer's private cost information becomes less valuable to both the national brand supplier and the retailer when the national brand unit production cost increases. We also illustrate that when the gap between the two possible cost values increases, the private cost information becomes more valuable to the national brand supplier, however the value of information to the retailer himself can either increase or decrease. Finally, we demonstrate that when the perceived quality of the national brand increases, the value of information to the retailer first decreases then increases, but the impact on the value of information to the national brand supplier can be either positive or negative.

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