Supply chain contract design in supplier- versus buyer-driven channels



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Texas A&M University


In the context of supply contract design, the more powerful party has the lib- erty of withholding private information which also improves its bargaining power. Traditionally, the supplier (e.g., manufacturer) has been more powerful, and, hence, the existing literature in the area emphasizes supplier-driven contracts. However, in some current markets, such as the grocery channel, the bargaining power has shifted to the buyer (e.g., retailer). For example, in the United States, large retailers, such as Wal-Mart, exert tremendous market power over their suppliers. Also, with the advent of the Internet, buyers have gained access to much more information about multiple potential suppliers. Hence, this dissertation takes into account the recent trends in power shifting between suppliers and buyers, and it attempts to provide a comparison of optimal supply contract designs in supplier- versus buyer-driven chan- nels. This research is unique in that we explore the impact of both power shifting and information asymmetry while designing optimal supply chain contracts under supply uncertainty and competition. Placing an emphasis on the cases of stochastic and/or price-sensitive demand, we work on several novel problems in stochastic mod- eling, nonlinear and dynamic optimization, and game theory. Hence, this research has roots in applied probability, optimization, inventory theory, game theory, and eco- nomics. The goal is to advance our practical knowledge of designing implementable contracts because such knowledge is crucial for optimizing supply chain performance in the real world. This dissertation provides insights about

  • the individual and joint impacts of the power structure and information asym- metry on supply chain performance,
  • the value of information for contract design in supplier- versus buyer-driven channels,
  • the impact of supply uncertainty and supplier competition on contract design in supplier- versus buyer-driven channels.