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Consumers may need help using an inherently complex product after purchase. This article studies a manufacturer's and a retailer's incentives to provide presales service and after-sales support in a distribution channel. The authors consider a model in which a manufacturer makes wholesale price and channel service decisions. Subsequently, a retailer makes retail price and channel service decisions. They find that, in equilibrium, both channel members provide presales service. If the fixed-cost investment needed to enhance the effectiveness of after-sales support is small, the manufacturer lets the retailer provide after-sales support. Yet when it is above a threshold and the retailer becomes unwilling to invest in providing after-sales support, the manufacturer steps in and does so. As expected, when the fixed cost is too large, the manufacturer also opts out of providing after-sales support. Interestingly, when the retailer provides after-sales support, the level of presales service and the demand for after-sales support can simultaneously be the highest among all configurations. Finally, the authors demonstrate the robustness of their main results by studying alternative channel service configurations. [ABSTRACT FROM AUTHOR]

The benefits of supplier diversification are well established for price-taking firms. In this paper, we investigate the benefits from supplier diversification for dual-sourcing duopolists. We consider a two-echelon supply chain [...]

In some industries (e.g., semiconductors, electronics, and agribusiness), buyers place noncommitted orders (called soft orders) to manufacturers in an effort to guide the manufacturer's production decisions. After the buyers know their own demand, they place purchase orders (called firm orders). These orders are often placed very close to the production start time or even after the production start time so that it is not possible for the manufacturer to revise its production schedule. The discrepancies between the soft order and the firm order often result in high excess inventories at the manufacturer. Without any commitment related to the soft orders by the buyers and the production by the manufacturer, the soft orders are often not effective. We hence propose a penalty contract, through which the buyers pay a penalty for canceling some portion of their soft orders. This contract can perfectly coordinate the decentralized supply chain of one manufacturer and multiple buyers and can lead to Pareto improvement in profits relative to the wholesale price contract for all firms in the supply chain. Our results indicate that it is more likely for the contract to achieve coordination and Pareto improvement when the manufacturer allocates the supply in proportion to the firm orders than when it allocates the supply according to the soft orders. We also illustrate the contract by using the data from a leading manufacturer in the industry. [ABSTRACT FROM AUTHOR]

Supply disruptions are all too common in supply chains. To mitigate delivery risk, buyers may either source from multiple suppliers or offer incentives to their preferred supplier to improve its process reliability. These incentives can be either direct (investment subsidy) or indirect (inflated order quantity). In this study, we present a series of models to highlight buyers' and suppliers' optimal parameter choices. Our base-case model has deterministic buyer demand and two possibilities for the supplier yield outcomes: all-or-nothing supply or partial disruption. For the all-or-nothing model, we show that the buyer prefers to only use the subsidy option, which obviates the need to inflate order quantity. However, in the partial disruption model, both incentives-subsidy and order inflation-may be used at the same time. Although single sourcing provides greater indirect incentive to the selected supplier because that avoids order splitting, we show that the buyer may prefer the diversification strategy under certain circumstances. We also quantify the amount by which the wholesale price needs to be discounted (if at all) to ensure that dual sourcing strategy dominates sole sourcing. Finally, we extend the model to the case of stochastic demand. Structural properties of ordering/subsidy decisions are derived for the all-or-nothing model, and in contrast to the deterministic demand case, we establish that the buyer may increase use of subsidy and order quantity at the same time. [ABSTRACT FROM AUTHOR]

We examine the role of expediting in dealing with lead-time uncertainties associated with global supply chains of 'functional products' (high volume, low demand uncertainty goods). In our developed stylized model, a retailer sources from a supplier with uncertain lead-time to meet his stable and known demand, and the supply lead-time is composed of two random duration stages. At the completion time of the first stage, the retailer has the option to expedite a portion of the replenishment order via an alternative faster supply mode. We characterize the optimal expediting policy in terms of if and how much of the order to expedite and explore comparative statics on the optimal policy to better understand the effects of changes in the cost parameters and lead-time properties. We also study how the expediting option affects the retailer's decisions on the replenishment order (time and size of order placement). We observe that with the expediting option the retailer places larger orders closer to the start of the selling season, thus having this option serve as a substitute for the safety lead-time and allowing him to take increased advantages of economies of scale. Finally we extend the basic model by looking at correlated lead-time stages and more than two random lead-time stages. [ABSTRACT FROM AUTHOR]