Excessive Competition and Supplier Non-Performance Risk: Trade-offs in Reverse Auctions

• 成果类型: Article
• 署名作者: Chaturvedi, Aadhaar
• 署名单位: University of Auckland
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.13418
• 发表日期: 2021
• 页码: 3073-3093
• 关键词: supplier non-performance; supplier competition; responsible sourcing; reverse auctions; order statistics

摘要

Supplier non-performance is an ever present problem for an original equipment manufacturer (OEM) buyer and past survey-based research has shown that increasing supplier competition adversely affects their performance. Using a reverse auction setting in which supplier competition is determined by number (n) of participating suppliers (bidders), we show how buyer's exposure to supplier non-performance risk is influenced by n. In particular, we characterize conditions under which supplier non-performance risk is increasing in n. We then formulate a buyer's decision on the optimal n for uniformly distributed costs that allows it to resolve its cost vs. risk trade-off. We further investigate other strategies like dual sourcing, better screening, and lower threshold on acceptable bids, that the buyer can use, together with limiting n, to limit non-performance risk and control its overall procurement cost. Managerially, our findings indicate that an OEM buyer procuring non-strategic (non-critical) components could increase its exposure to supplier non-performance risk by leveraging too much competition, especially among small entrant suppliers. In such situations a buyer can manage its input cost and risk by limiting supplier competition.