Delegation vs. Control in Supply Chain Procurement under Competition

• 成果类型: Article
• 署名作者: Bolandifar, Ehsan; Kouvelis, Panos; Zhang, Fuqiang
• 署名单位: Chinese University of Hong Kong; Washington University (WUSTL)
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12566
• 发表日期: 2016
• 页码: 1528-1541
• 关键词: procurement; DELEGATION; Contract manufacturing; supply chain

摘要

This paper studies the optimal component procurement strategies of two competing OEMs selling substitutable products. The OEMs outsource their production to a common contract manufacturer, who in turn needs an input from a component supplier. Each OEM may either directly procure the input from the component supplier, or delegate the procurement task to the contract manufacturer. We first analyze the OEMs' procurement game under a non-strategic supplier whose component price is exogenously given. It is found that symmetric equilibria arise for most situations, that is, both OEMs either control or delegate their component procurement in equilibrium. Interestingly, despite the commonly-held belief that the contract manufacturer would be worse off as OEMs gain component procurement control, we show that the contract manufacturer may enjoy a higher profit. Then we study the OEMs' procurement game under a strategic supplier who can set its component price. We find that the supplier's strategic pricing behavior plays a critical role in the equilibrium procurement structure. In particular, in the equilibrium under strategic supplier, the larger OEM always uses delegation while the smaller OEM may use either delegation or control. By identifying the driving forces behind the OEMs' procurement choices, this research helps explain observed industry practices and offer useful guidelines for firms' component sourcing decisions.