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Journal of Business Economics

, Volume 84, Issue 5, pp 665–714 | Cite as

Towards contract based coordination of distributed product development processes with complete substitution

  • Kerstin SchmidtEmail author
  • Thomas Volling
  • Thomas S. Spengler
Original Paper
  • 275 Downloads

Abstract

In distributed product development processes system integrators collaborate with suppliers to provide marketable products. We analyze contract structures in their ability to coordinate such processes. A converging supply chain with two suppliers and one system integrator is considered. Each supplier develops one component and faces uncertainty with regard to development results. For the system integrator the specifications of both components are substitutive in terms of the specification of the final product (e.g., recycling quotas). Depending on the resulting specification of the final product, the system integrator generates revenues under a maximum price clause. We apply a game-theoretic framework: the system integrator is the Stackelberg leader and the suppliers are Stackelberg followers. Assuming uniformly distributed development results, we analyze two typical development contracts: a wholesale price contract and a penalty contract. We present numerical illustrations of centralized and decentralized solutions to gain qualitative insights about the optimal decisions and the coordination ability of the two contracts. Accordingly, both contracts coordinate the supply chain only under forced compliance.

Keywords

Product development processes Supply chain coordination Contracts Supply uncertainty Substitution 

JEL Classification

D86 

Notes

Acknowledgments

We would like to thank the anonymous referees for all comments and suggestions that have improved the quality of the paper. This contribution is based on the project “SAKE – Systemanalyse und Koordination flexibler Entwicklungsprozesse für komplexe Eingebettete Systeme” (grant number SP 491/3-1) which was funded by the German Research Foundation (DFG). On behalf of all project partners the authors would like to thank for the support.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  • Kerstin Schmidt
    • 1
    Email author
  • Thomas Volling
    • 2
  • Thomas S. Spengler
    • 1
  1. 1.Institute of Automotive Management and Industrial Production, Chair of Production and Logistics, Technische Universität BraunschweigBrunswickGermany
  2. 2.Chair of Production and Logistics ManagementFernUniversität in HagenHagenGermany

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