← Search

Strategic Supply Chain Structure Design for a Proprietary Component Manufacturer

Yi Xu¹; Haresh Gurnani²; Ramarao Desiraju³

¹ Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742, USA, · ² School of Business Administration, University of Miami, Coral Gables, Florida 33146, USA, · ³ College of Business Administration, University of Central Florida, Orlando, Florida 32816, USA,

This paper examines the choice of supply chain structure for a proprietary component manufacturer (PCM). The PCM, who is the sole supply source of a critical component used to assemble an end product, can either provide its component to an original equipment manufacturer (OEM) in the end‐product market (component supplier structure), develop the end product exclusively under its own brand (monopoly structure), or provide the component to the OEM as well as develop the end product under its own brand (dual distributor structure). Typically, the end products of the PCM and the OEM will be differentiated, and the OEM tends to have a capability advantage (compared with the PCM) in producing the end product. Our paper studies the impact of this degree of differentiation and capability advantage on the optimal choice of distribution structure. We then investigate how investing in component branding, enhancing the value of the end product, using alternative supply contracts, and product valuation uncertainty influence the PCM's optimal choice of distribution structure.

DOI

10.1111/j.1937-5956.2009.01116.x

Volume

19 (4)

Pages

371-389

Language

en

Export

BibTeX

Sources

crossref