Managing high-tech capacity expansion via reservation contracts

• 成果类型: Article
• 署名作者: Erkoc, M; Wu, SD
• 署名单位: University of Miami; Lehigh University
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• 发表日期: 2005
• 页码: 232-251
• 关键词: capacity reservation; option contracts; COORDINATION; information update; contract compliance

摘要

We study capacity reservation contracts between a high-tech manufacturer (supplier) and her OEM customer (buyer). The supplier and the buyer are partners who enter a design-win agreement to develop the product, and who share the stochastic demand information. To encourage the supplier for more aggressive capacity expansion, the buyer reserves capacity upfront by paying a deductible fee. As capacity expansion demonstrates diseconomy of scale in this context, we assume convex capacity costs. We show that as the buyer's revenue margin decreases, the supplier faces a sequence of four profit scenarios with decreasing desirability. We examine the effects of market size and demand variability to the contract conditions. We propose two channel coordination contracts, and discuss how such contracts can be tailored for situations where the supplier has the option of not complying with the contract, and when the buyer's demand information is only partially updated during the supplier's capacity lead-time.