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Collaborative Supply Chain Management

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Planning Production and Inventories in the Extended Enterprise

Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 151))

Abstract

The management of supply chains has become progressively more complex and challenging due to higher customer expectations for better service, higher quality, lower prices, and shorter leadtimes; ongoing demand uncertainty; an increase in product variation; and shorter product life cycles. The increasing importance of supply chain efficiency as a key competitive advantage has changed the nature of many intra- and inter-firm relationships from adversarial to collaborative. An industry survey by Forrester Research reveals that 72% of firms say supplier collaboration is “critical to their product development success” (Radjou et al. 2001). An AMR Survey at Microsoft Engineering and Manufacturing Executive Summit, which was conducted with the participation of CEO, CFO, CIO, and Sr. VPs of Fortune 1,000 companies, shows that 58% of the participants consider collaboration as a strategic necessity, while another 32% consider it to be very important. 57% of the participants state that they are directly involved in leading collaboration efforts (Caruso 2002).

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Notes

  1. 1.

    “Fujitsu cuts procurement costs and suppliers.” Purchasing Magazine Online. February 21, 2002.

  2. 2.

    “Aligning incentives with strategic and operational goals critical to performance management success” http://www.pharmalive.com/News/Index.cfm?articleid$=$342812.

  3. 3.

    “Making the link between sales and operations planning.” http://mba.tuck.dart\-mouth.edu/digital/Programs/CorporateRoundtables/ElusiveIntegration/Overview_OnlinePDF.pdf.

  4. 4.

    The material in this section is based on Erhun and Keskinocak (2003).

  5. 5.

    Note that in such a deterministic environment, the retailer will always purchase from the supplier exactly as much as he will sell in the market. The “common knowledge” assumption may imply some information sharing between the supply chain partners.

  6. 6.

    “Revenue-sharing contracts boost supply chain performance.” CNet News.com, October 18, 2000.

  7. 7.

    The ability to share the risk of excess inventory is not unique to buyback contracts. In fact, revenue sharing also allows inventory risk sharing since the retailer in this case commits to a smaller initial capital expense for inventory.

  8. 8.

    Gartner Research estimates that “80 percent of outsourcing relationships will be renegotiated during lifetime of contract.” (“80 percent of outsourcing relationships will be renegotiated during lifetime of contract.” AEC Online. April 27, 2005).

  9. 9.

    “Collaborative production management solutions on the rise.” http://www.ferret.com.au/.

  10. 10.

    “Discrete manufacturing CPM market to double; will top $1 billion by 2008.” http://www.mhmonline.com/.

  11. 11.

    In arborescent supply chains, each player has only one supplier but can act as a supplier to one or many players.

  12. 12.

    “Collaborative production management for the discrete market grows 15%.” IndustryWeek. September 12, 2005.

  13. 13.

    In a stable or fair cost allocation, no coalition of members can find a better way of collaborating on their own. Hence, the grand coalition is perceived as fair and is not threatened by its subcoalitions. Thus, stability is the key concept that holds a collaboration together.

  14. 14.

    Ozener and Ergun (2008) note that due to the costs associated with managing collaborations, limited rationality of the players and membership fees, a subcoalition might not be formed even though it offers additional benefits to its members. Therefore, relaxing the stability restriction in a limited way might be acceptable for a cost allocation method.

  15. 15.

    “Buyers use more than one way to cut component costs.” Purchasing. March 17, 2005: http://www.purchasing.com/article/CA510893.html?industryid$=$2147&nid = 2419.

  16. 16.

    “Hackett report finds best procurement orgs see greater ROI.” Purchasing. December 8, 2005: http://www.purchasing.com/article/CA6289412.html?text$=$procurement$+$ spending.

  17. 17.

    WWRE is now a part of Agentrics LLC, due to a merger with GNX.

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Acknowledgments

This research is partially funded by NSF Grants DMI-0400345, DMI-0427446, DMI-0400301, and ITR 0427446. We would like to acknowledge the research assistance of Özlem Bilginer, Department of Management Science and Engineering, Stanford University.

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  1. Department of Management Science and Engineering, Stanford University, Stanford, CA, 94305-4026, USA

    Feryal Erhun

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  1. Feryal Erhun
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Correspondence to Feryal Erhun .

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  1. Decision Technologies, Intel Corporation, W. Chandler Blvd. 5000, Chandler, 85226, Arizona, USA

    Karl G. Kempf

  2. School of Industrial &, Systems Engineering, Georgia Institute of Technology, Ferst Drive NW., 765, Atlanta, 30332-0205, Georgia, USA

    Pınar Keskinocak

  3. , Edward P. Fitts Department of Industrial, North Carolina State University, Daniels Hall 300, Raleigh, 27695, North Carolina, USA

    Reha Uzsoy

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Erhun, F., Keskinocak, P. (2011). Collaborative Supply Chain Management. In: Kempf, K., Keskinocak, P., Uzsoy, R. (eds) Planning Production and Inventories in the Extended Enterprise. International Series in Operations Research & Management Science, vol 151. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-6485-4_11

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