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Make-or-buy service capacity decision in a supply chain providing after-sales service

Published on Dec 1, 2014in European Journal of Operational Research3.81
· DOI :10.1016/j.ejor.2014.05.035
Gang Li14
Estimated H-index: 14
(Ministry of Education),
Feng Feng Huang2
Estimated H-index: 2
(Ministry of Education)
+ 2 AuthorsPing Ji26
Estimated H-index: 26
(PolyU: Hong Kong Polytechnic University)
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Abstract
We consider a supply chain comprising a manufacturer and a retailer. The manufacturer supplies a product to the retailer, while the retailer sells the product bundled with after-sales service to consumers in a fully competitive market. The sales volume is affected by the retailer’s service-level commitment. The retailer can build service capacity in-house at a deterministic price before service demand is realized, or buy the service from an outsourcing market at an uncertain price after service demand realization. We find that the outsourcing market encourages the retailer to make a higher level of service commitment, while prompting the manufacturer to reduce the wholesale price, resulting in more demand realization. We analyze how the expected cost of the service in the outsourcing market and the retailer’s risk attitude affect the decisions of both parties. We derive the conditions under which the retailer is willing to build service capacity in-house and under which it will buy the service from the outsourcing market. Moreover, we find that the manufacturer’s sharing with the retailer the cost to build service capacity improves the profits of both parties.
  • References (31)
  • Citations (20)
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References31
Newest
Published on Nov 1, 2013in Mathematical and Computer Modelling
Desheng Dash Wu32
Estimated H-index: 32
(RU: Reykjavík University)
Abstract This paper investigates the bargaining equilibrium behavior of an industry with two competing supply chains. The demand in each supply chain is modeled using the downward-sloping linear function with respect to both price and promotional effort. The optimality is established through Nash bargaining when the two competing manufacturers distribute through two independent competing retailers. We show, when both price and promotional effort dependent demand is present, that both the traditi...
Published on Nov 1, 2011in European Journal of Operational Research3.81
N. C. P. Edirisinghe12
Estimated H-index: 12
(UT: University of Tennessee),
B. Bichescu1
Estimated H-index: 1
(UT: University of Tennessee),
X. Shi1
Estimated H-index: 1
(Cisco Systems, Inc.)
This paper investigates the implications of channel power on supply chain stability in a setting where multiple suppliers sell substitutable products through a common retailer. Such supply chains have been traditionally analyzed as one- or two-stage Stackelberg non-cooperative games with all suppliers sharing balanced (equal) decision-making power. In this paper, we relax this assumption and formulate game-theoretic models to examine scenarios where one supplier can act as the Stackelberg leader...
Published on May 1, 2011in Economic Modelling2.06
Jye-Chyi Lu1
Estimated H-index: 1
(Georgia Institute of Technology),
Yu-Chung Tsao16
Estimated H-index: 16
(TTU: Tatung University),
Chayakrit Charoensiriwath2
Estimated H-index: 2
(Georgia Institute of Technology)
This research highlights the importance of service from manufacturers in the interactions between two competing manufacturers and their common retailer, facing end consumers who are sensitive to both retail price and manufacturer service. A game-theoretic framework is applied to obtain the equilibrium solutions for every entity. This article studies and compares results from three possible supply chain scenarios, (1) Manufacturer Stackelberg, (2) Retailer Stackelberg, and (3) Vertical Nash. This...
Published on Mar 1, 2011in Management Science4.22
Weixin Shang6
Estimated H-index: 6
(Fudan University),
Liming Liu23
Estimated H-index: 23
(PolyU: Hong Kong Polytechnic University)
We investigate firms' competitive behaviors in industries where customers are sensitive to both promised delivery time (PDT) and quality of service (QoS) measured by the on-time delivery rate. To study the competition in PDT at the marketing level, we construct an oligopoly game with an external QoS requirement. We show that there exists a unique Nash equilibrium, and the equilibrium QoS exhibits a switching surface structure with respect to capacities. To study the competition in capacity at th...
Published on Feb 1, 2011in Mathematical Methods of Operations Research1.02
Xin Guo19
Estimated H-index: 19
(UC: University of California),
Philip Kaminsky16
Estimated H-index: 16
(UC: University of California)
+ 1 AuthorsM. Yuen1
Estimated H-index: 1
(UC: University of California)
We consider a firm facing random demand at the end of a single period of random length. At any time during the period, the firm can either increase or decrease inventory by buying or selling on a spot market where price fluctuates randomly over time. The firm’s goal is to maximize expected discounted profit over the period, where profit consists of the revenue from selling goods to meet demand, on the spot market, or in salvage, minus the cost of buying goods, and transaction, penalty, and holdi...
Published on Oct 1, 2010in Management Science4.22
Achal Bassamboo18
Estimated H-index: 18
(NU: Northwestern University),
Ramandeep S. Randhawa10
Estimated H-index: 10
(SC: University of Southern California),
Assaf Zeevi27
Estimated H-index: 27
(Columbia University)
We study a capacity sizing problem in a service system that is modeled as a single-class queue with multiple servers and where customers may renege while waiting for service. A salient feature of the model is that the mean arrival rate of work is random (in practice this is a typical consequence of forecasting errors). The paper elucidates the impact of uncertainty on the nature of capacity prescriptions, and relates these to well established rules-of-thumb such as the square-root safety staffin...
Published on Sep 1, 2010in International Journal of Production Economics5.00
Hisashi Kurata9
Estimated H-index: 9
(University of Tsukuba),
Seong-Hyun Nam5
Estimated H-index: 5
(UND: University of North Dakota)
For durable consumer products, after-sales services play an important role in customers' purchase decisions. A manufacturer offers basic warranty available to all customers who buy the product, while a retailer offers optional after-sales service that is available only to customers who pay for the option. We explore the interaction of these two after-sales services assuming two customer segments. Formulating five analytical models, we found that after-sales service plans that are determined to m...
Published on Jul 1, 2010in European Journal of Operational Research3.81
Marco Bijvank7
Estimated H-index: 7
(VU: VU University Amsterdam),
Ger Koole31
Estimated H-index: 31
(VU: VU University Amsterdam),
Iris F. A. Vis19
Estimated H-index: 19
(VU: VU University Amsterdam)
Field services are a particular type of after-sales service performed at the customer's location where technicians repair malfunctioning machines. The inventory decisions about which spare part types to take to the repair site and in what quantities is called the repair kit problem. This problem is characterized by an order-based performance measure since a customer is only satisfied when all required spare parts are available to fix the machine. As a result, the service level in the decision ma...
Published on Jun 1, 2010in European Journal of Operational Research3.81
Kewen Pan2
Estimated H-index: 2
(CityU: City University of Hong Kong),
Kin Keung Lai47
Estimated H-index: 47
(CityU: City University of Hong Kong)
+ 1 AuthorsDi Xiao1
Estimated H-index: 1
(College of Business Administration)
We consider a supply chain channel with two manufacturers and one retailer. Each manufacturer can choose either a wholesale price contract or a revenue-sharing contract with the retailer. We discuss and compare the results of two different types of contracts under different channel power structures, to check whether it is beneficial for manufacturers to use revenue-sharing contracts under different scenarios. Then we consider a supply chain channel with one manufacturer and two retailers. Each r...
Published on Jul 1, 2009in European Journal of Operational Research3.81
Ming Fan19
Estimated H-index: 19
(UW: University of Washington),
Subodha Kumar14
Estimated H-index: 14
(UW: University of Washington),
Andrew B. Whinston71
Estimated H-index: 71
(University of Texas at Austin)
Software as a service (SaaS) has moved quickly from a peripheral idea to a mainstream phenomenon. By bundling a software product with delivery and maintenance service, SaaS providers can effectively differentiate their products with traditional shrink-wrap software (SWS). This research uses a game theoretical approach to examine short- and long-term competition between SaaS and SWS providers. We analyze the factors that affect equilibrium outcomes, including user implementation costs, SaaS provi...
Cited By20
Newest
Published on May 1, 2019in European Journal of Operational Research3.81
Shuguang Zhang1
Estimated H-index: 1
(Chongqing University),
Bin Dan6
Estimated H-index: 6
(Chongqing University),
Maosen Zhou1
Estimated H-index: 1
(SZU: Shenzhen University)
Abstract This paper investigates after-sale service deployment and information sharing strategies in a supply chain environment including the role of a manufacturer and an independent retailer. The manufacturer first needs to decide whether it is necessary to undertake the after-sale service by herself or delegate it to the retailer. Then, the retailer possessing better demand-forecast information decides whether to share their information with the manufacturer. When the manufacturer undertakes ...
Published on Jan 1, 2019in Journal of Business Research4.03
Oscar F. Bustinza14
Estimated H-index: 14
(UGR: University of Granada),
Esteban Miguel Lafuente González12
Estimated H-index: 12
(UPC: Polytechnic University of Catalonia)
+ 2 AuthorsFerran Vendrell-Herrero14
Estimated H-index: 14
(University of Birmingham)
Abstract This research examines firm boundary configurations for manufacturers' product-service offerings. We argue that the building of a product-service ecosystem through collaboration with service providers in certain types of business services can increase performance as a result of the superior knowledge-based resources coming from specialized partners. By using fuzzy set qualitative analysis on a sample of 370 multinational manufacturing enterprises (MMNEs), the results reveal that effecti...
Published on Jul 1, 2019in International Journal of Production Economics5.00
Zili Guan (Chongqing University), Xumei Zhang7
Estimated H-index: 7
(Chongqing University)
+ 1 AuthorsYiran Dan (Chongqing University)
Abstract. This paper investigates the issue of sharing demand information in two competing supply chains, each consisting of one manufacturer who provides consumers with free after-sales service and one retailer who has private information about uncertain demand. The demand is linearly affected by retail prices and service levels of both supply chains, which captures both price and service competition. By modeling a multistage game framework, we examine the impacts of information sharing on pric...
Published on Jun 3, 2019in Nankai Business Review International
Miao Sun1
Estimated H-index: 1
(SWUFE: Southwestern University of Finance and Economics),
Ye Tian1
Estimated H-index: 1
(SWUFE: Southwestern University of Finance and Economics)
+ 1 AuthorsYi Liao (SWUFE: Southwestern University of Finance and Economics)
Purpose This paper aims to study the mixed after-sales service which simultaneously offers return and replacement services. The authors develop a model to propose what kind of after-sales service the firm should choose and how to make the after-sales service policy to improve the profit. The study aims to extend the literature on the mixed after-sales service and give some support to the managers to make decisions. Design/methodology/approach In this paper, the authors use the optimization model...
Published on Sep 2, 2018in International Journal of Production Research3.20
Bin Dan6
Estimated H-index: 6
(Chongqing University),
Shuguang Zhang1
Estimated H-index: 1
(Chongqing University),
Maosen Zhou1
Estimated H-index: 1
(SZU: Shenzhen University)
This paper studies a dual-channel supply chain composed of a manufacturer and a retailer. The manufacturer and the retailer sell homogeneous durable goods bundled with warranty service that is provided by the manufacturer, and they compete for customers by offering free value-added service. Both the warranty and value-added services can affect the purchasing behaviour of customers. We examine the warranty service decision of the manufacturer and the value-added service competition between the ma...
Published on Sep 1, 2018in Journal of Cleaner Production6.39
Mehdi Ben Amor1
Estimated H-index: 1
(Linköping University),
Mattias Lindahl17
Estimated H-index: 17
(Linköping University)
+ 1 AuthorsHafedh Ben Abdennebi1
Estimated H-index: 1
(Carthage College)
Abstract This literature review puts forward a comparison between the traditional seller, usually represented by classic Industrial Organization (IO) models, and system providers, which are illustrated by Product Service System (PSS) models. A multidisciplinary systematic literature review, that compares PSS and IO models, is conducted, and ends up in to define PSS as a technology highlights the differences and similarities between classic IO and classic PSS and evaluate the weakness and strengt...
Published on May 1, 2018in European Journal of Operational Research3.81
Aditya Jain5
Estimated H-index: 5
(Baruch College),
Ram Bala5
Estimated H-index: 5
(Santa Clara University)
Several firms across different product-focused industries, such as Dell, GM and Keurig, offer associated services along with their products. Given that firms routinely offer a portfolio of vertically differentiated products, a crucial question facing such firms is whether such differentiation should also be extended to associated services. Service differentiation lowers cannibalization of the high-quality product by the low-quality product and increases revenues, but it requires dedicated capaci...
Published on Feb 1, 2018in European Journal of Operational Research3.81
Qiang Li2
Estimated H-index: 2
(JNU: Jinan University),
Baozhuang Niu7
Estimated H-index: 7
(SCUT: South China University of Technology)
+ 2 AuthorsJunwei Wang1
Estimated H-index: 1
(HKU: University of Hong Kong)
Abstract We consider a two-stage supply chain comprising one risk-neutral manufacturer (he) and one risk-averse retailer (she), where the manufacturer procures consumption commodities in spot market as major inputs for production and sells the final products to the retailer. The retailer then sells the final products to the market at a stochastic clearance price. We investigate a flexible price contract that allows the manufacturer to determine the product wholesale price, and the retailer to de...
Purpose The purpose of this paper is to build a warranty cost model for consumer electronics with short lifecycle and frequently upgraded process in generations. Meanwhile, a new warranty service method of replacing the failed old generation (OG) products by new generation (NG) products is proposed to cease the service capability for the OG products from manufacturers’ viewpoint. Design/methodology/approach A model is built to find an optimal time to switch to the new warranty service method to ...