Knowledge that Transforms

More firms than ever before are disclosing the provenance of their products, results of product testing, and suppliers’ compliance with labor‐practice norms in their annual reports, sustainability reports, and press releases, besides making such information available on third‐party websites. However, collecting and disclosing such information is not only costly but also does not provide clear benefits. While the terminology is not yet standard in the literature, this study distinguishes supply chain transparency from visibility. Here, visibility refers to managers’ efforts to learn more about operations upstream in their supply chains. In contrast, by transparency, we mean a company disclosing information to consumers, investors, and other stakeholders about compliance with consumer‐expected norms in its supply chain operations and products. To motivate further research on supply chain transparency, we first report recent examples of companies providing supply chain transparency. Then we present potential benefits of supply chain visibility and supply chain transparency, respectively, for the company. Finally, we propose topics for research on supply chain transparency arranged by stakeholder.

The role of national culture interactions is important in operations management and supply chain management decisions. Yet, cross‐cultural research in this field is limited. Our goal in this study is to review relevant research, to raise awareness about the critical role of national culture among operations management and supply chain management researchers, and to offer directions for future research. To achieve this goal, we report our research findings in three major categories: (i) Operational Decisions (innovation, and research and development, quality management, workforce management, performance measurement, and risk, security and disaster management); (ii) Supply Chain Management (buyer–supplier interactions, governance mechanisms, outsourcing, and offshore operations); and (iii) Interdisciplinary Topics (entrepreneurship, investments, joint ventures, and mergers and acquisitions). We also suggest methodological considerations for future research by those interested in studying national culture.

This paper studies how a manufacturer should engage with a platform retailer and a traditional reseller. Our work is motivated by the emergence of increasingly powerful retail platforms in China’s consumer electronics and appliances markets. The manufacturer pays a slotting fee and a portion of its sales revenue to the platform retailer in exchange for the opportunity to manage its own space within the retailer’s store. The manufacturer can also sell its product to a traditional reseller thereby earning its wholesale price. We first formulate a Stackelberg game where the platform retailer leads by setting the revenue‐sharing rate while the manufacturer follows by choosing to sell through one or both channels. We derive the equilibrium channel and characterize each party’s associated sales quantities, prices, and profits. After confirming, it is always beneficial for the platform retailer to determine the slotting fee and revenue‐sharing rate simultaneously, we then formulate two bargaining models between the manufacturer and the platform retailer. In the first model, they can negotiate just the revenue‐sharing rate and in the second they negotiate both the revenue‐sharing rate and the slotting fee. In the second model, a win‐win result for the manufacturer and platform retailer is possible. We find that the slotting fee is neither always beneficial to the platform retailer nor always harmful to the manufacturer; it depends on the demand substitution effect between the two retail channels.

This study presents an analytical framework of the product take back legislation in the context of product reuse. We characterize existing and proposed forms of E‐waste legislation and compare their environmental and economic performance. Using stylized models, we analyze an OEM's decision about new and remanufactured product quantity in response to the legislative mechanism. We focus on the 2012 waste electrical and electronic equipment directive in Europe, where the policy makers intended to create additional incentives for the product reuse. Through a comparison to the Original 2002 version of the directive, we find that these incentives translate into improved environmental outcomes only for a limited set of products. We also study a proposed policy that advocates a separate target for the product reuse. Our analysis reveals that from an environmental standpoint, the Recast version is always dominated either by the Original policy or by the one that advocates a separate target for product reuse. We show that the benefits of a separate reuse target scheme can be fully replicated with the aid of fiscal levers. Our main message is that there cannot be a single best environmental policy that is suitable for all products. Therefore, the consideration of product attributes is essential in identification of the most appropriate policy tool. This can be done either by the implementation of different policies on each product category or by implementation of product‐based target levels.

This paper studies how to design service outsourcing contracts to ensure fast, quality services from an independent service provider. The outsourcer does not have perfect information about the service provider’s capacity cost (i.e., cost of providing fast service) and quality cost (i.e., cost of achieving a high quality level). Moreover, the two unknown costs may be positively, or negatively, correlated with each other. We solve for the outsourcer’s optimal outsourcing contract, and show that the structure of the optimal contract depends on the relationship between the costs. Specifically, we highlight the following observations when the two costs are negatively correlated: First, under certain conditions, the outsourcer may be able to squeeze the supplier’s profit (information rent) to zero for an intermediate range of cost realizations; second, it is possible that the service supply chain is coordinated by using the outsourcer’s optimal contract. We then examine the performance of two classes of commonly observed contracts that are relatively simple to implement. It has been found that these simple contracts generally perform well when the costs are positively correlated, but they could perform much worse when the costs are negatively correlated. Our results therefore caution outsourcing companies that the potential trade‐off between capacity cost and quality cost may require a careful design of outsourcing contracts.

This paper studies the effects of bank credit availability, trade credit and the capital cost on inventory decisions. There are two competing theories on the effect of bank credit lines on investments. While one (Lins et al. 2010) suggests that the primary role played by undrawn credit is to finance new opportunities, the other (Acharya et al. 2014) suggests that undrawn credit serves primarily as a bank monitored liquidity insurance. We attempt to resolve these two conflict views in the context of inventory investments. Using empirical data, we show that the primary role of undrawn credit depends on the individual firm’s financial status. When a firm is financially constrained, its inventory decisions are linked to the additional bank credit available to the firm—echoing the insurance nature of bank credits. On the other hand, when a firm is financially healthy, two other inventory financing factors play more significant roles than undrawn credits. For financially healthy firms, inventory investments are significantly negatively related to the financial cost of inventory and positively related to the credit offered by suppliers. Additionally, we study the financial crisis of 2007–2008 as a systematic shock in the credit market to identify the effects of a firm’s financial credits. We show that during the financial crisis, the inventory turnover and working capital levels of US retailers were related to the availability of bank credit. However, immediately after the crisis, the evidence demonstrates the positive relationship between firms’ inventory level and the trade credit they are offered.

Retail inventories have been consistently dropping, relative to sales, since the 1990s. Whether these lean inventory developments translate to better retailer operational performance is still an open question. We empirically examine associations between inventory leanness and operational efficiency for a sample of public US retailers from 2000 to 2013. Via a stochastic frontier analysis that accounts for retailer heterogeneity and time parameters, we find support for the hypothesis that operational efficiency has an inverted U‐shape relationship with inventory leanness, suggesting an optimal inventory leanness level beyond which retailer operational efficiency degrades. This relationship, however, is heavily moderated by firm size and demand uncertainty. The former reflects a retailer's abilities to exploit economies of scale and scope, whereas the latter reflects the unpredictability in a firm's operating environment. Our evidence suggests that when increasing inventory leanness, small retailers exhibit efficiency degradation, whereas larger retailers are likely to exhibit efficiency improvement, with diminishing returns. We also find that under high demand uncertainty, being less lean is associated with higher operational efficiency, regardless of firm size. The findings show that depending on firm size and demand uncertainty, retail managers should take special care when pursuing inventory leanness. As part of post hoc robustness tests, we assess how different retail categories vary in their operational efficiency scores and conduct interviews with retail executives who further ground our econometric investigation and point to more nuanced moderators for future studies. We conclude by discussing the implications of our industry model estimation for managers and researchers.

We present a collaborative prepositioning strategy to strengthen the disaster preparedness of the Caribbean countries, which are frequently hit by hurricanes. Since different subsets of countries are affected in each hurricane season, significant risk pooling benefits can be achieved through horizontal collaboration, which involves joint ownership of prepositioned stocks. We worked with the intergovernmental Caribbean Disaster and Emergency Management Agency to design a collaborative prepositioning network in order to improve regional response capacity. We propose a novel insurance‐based method to allocate the costs incurred to establish and operate the proposed collaborative prepositioning network among the partner countries. We present a stochastic programming model, which determines the locations and amounts of relief supplies to store, as well as the investment to be made by each country such that their premium is related to the cost associated with the expected value and the standard deviation of their demand. We develop a realistic data set for the network by processing real‐world data. We conduct extensive numerical analyses and present insights that support practical implementation. We show that a significant reduction in total inventory can be achieved by applying collaborative prepositioning as opposed to a decentralized policy. Our results also demonstrate that reducing the replenishment lead time during the hurricane season and improving sea connectivity are essential to increasing the benefits resulting from the network.

Procurement auctions are widely used by governments and corporations to solicit bids for services and projects. Such auctions involve significant risk for the buyer, because the delivered quality is highly uncertain. We examine a multi‐attribute procurement auction combined with a performance‐based contract. In this setting, suppliers submit bids which include both price and promised quality. After the buyer awards the contract to the winning bidder with the highest score, the supplier exerts efforts to accomplish the project, and buyer satisfaction is randomly affected by both promised quality and effort. A performance‐contingent reward or penalty occurs upon project delivery. We show that bidders jointly optimize promised quality and effort before submitting a bid price. Depending upon the relative impacts from promised quality and effort on buyer’s satisfaction, the promised quality and execution effort can be complements or substitutes. Our analysis reveals that the information rent that the supplier gains depends on the relationship between promised quality and buyer satisfaction. Further, the optimal scoring rule distorts promised quality downwardly. We find that either reserve quality or price alone is insufficient to exclude undesirable bidders. Compared with efficient mechanism, the effort under optimal mechanism is distorted upwardly (downwardly) when it substitutes (complements) promised quality. We also find that the risk uncertainty can benefit both buyer and supplier, under certain conditions of an additive relationship between supplier’s behaviors and randomness, resulting in a Pareto improvement.

This study studies discretionary healthcare services with consumption of medical goods (e.g., tests, drugs). Specifically, we focus on a setting where the service provider obtains revenue from the medical consumption, and the perceived service value improves while the amount of medical consumption decreases in the service time (e.g., due to more thorough inquiry and examination). We find that the equilibrium service and demand rates both decrease if the service provider’s share of revenue from the medical consumption decreases, or if the medical goods become more expensive. Moreover, the consumption of goods can reverse some well‐known results in models without goods: the service provider may reduce the service time when the perceived service value depends more heavily on the service time. From a policy perspective, we find that service price caps—often put in place to control medical costs—can lead to shorter service times and increased medical consumption. This effect is more severe when the service provider retains less revenue from the medical goods or when they are less expensive. Furthermore, without service price caps, facing a smaller market size, the service provider generally offers a longer service time inducing less medical consumption; however, this can be reversed with service price caps. Thus, in discretionary healthcare services accompanied by medical goods, price regulations may lead to wasteful consumption; extra attention is needed for certain market scenarios.