The Impact of Incentives When Outsourcing

As companies have outsourced more supply chain activities, it has become harder to align the goals of all parties involved. The misalignment of incentives often hurts supply chain perfor­mance. The $2.5 billion writedown of inventory by Cisco in 2001 is an example of the cost of misaligned incentives. Cisco outsourced production to contract manufacturers

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Designing a Sourcing Portfolio: Tailored Sourcing

When structuring a supplier portfolio, firms have many options regarding whom to source from and where to source from. With regard to the “whom,” a company must decide on whether to produce in-house or outsource to a third party. The company must also decide whether the supply source will be cost efficient or responsive.

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Making Sourcing Decisions in a Supply Chain in Practice

Use multifunctional teams. Effective strategies for sourcing result from multifunc­tional collaboration within the firm. A sourcing strategy from the purchasing group is likely to be relatively narrow and focus on purchase price. A strategy developed with the collaboration of purchasing, manufacturing, engineering, and planning is much more likely to identify the correct drivers of

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The Role of Pricing and Revenue Management in a Supply Chain

In Chapter 9, we discussed how short-term price promotions could be an effective tool to more profitably meet seasonal demand. In this chapter, we further build on the idea of using pricing as an important lever to increase supply chain profits by better matching supply and demand, espe­cially when there are multiple customer types

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Pricing and Revenue Management for Multiple Customer Segments in a Supply Chain

  A classic example of a market with multiple customer segments is the airline industry, in which business travelers are willing to pay a higher fare to travel on a specific schedule, whereas leisure travelers are willing to shift their schedules to take advantage of lower fares. Many similar instances arise in a supply

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Pricing and Revenue Management for Perishable Assets in a Supply Chain

Any asset that loses value over time is perishable. Clearly, fruits, vegetables, and pharmaceuti­cals are perishable, but this list also includes products such as computers and cell phones that lose value as new models are introduced. High-fashion apparel is perishable because it cannot be sold at full price once the season is past. Perishable

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Pricing and Revenue Management for Seasonal Demand in a Supply Chain

Seasonal peaks of demand are a common occurrence in many supply chains. Most retailers in the United States achieve a significant fraction of their annual sales during the month of December. One such example is Amazon. As a result of the seasonal peak, the requirement for picking and packing and transportation capacity at Amazon

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Pricing and Revenue Management for Bulk and Spot Contracts in a Supply Chain

Most firms face a market in which some customers purchase in bulk at a discount and others buy single units or small lots at a higher price. Consider an owner of warehousing capacity in a supply chain. Warehousing capacity may be leased in bulk to a large company or in small amounts to large

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Using Pricing and Revenue Management in a Supply Chain in Practice

Evaluate your market carefully. The first step in revenue management is to identify the customer segments being served and their needs. The goal is to understand what the customer is buying, as opposed to what you are selling. If an airline thinks of itself as only selling seats, it cannot use revenue management. It

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The Role of Sustainability in a Supply Chain

This book has focused on designing and operating supply chains with a goal of growing the sup­ply chain surplus. Each supply chain, however, is only a small part of the world in which it resides. Ultimately, the health and survival of every supply chain and every individual depend on the health of the surrounding

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The Tragedy of the Commons in a Supply Chain

In an influential article, Hardin (1968) described the tragedy of the commons as a dilemma aris­ing when the common good does not align perfectly with the good of individual entities. It is useful to study his example in somewhat greater detail. Consider a pasture that is open to all herders with cattle. Each herder

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Key Pillars of Sustainability in a Supply Chain

Sustainability in a supply chain can be viewed along three pillars—social, environmental, and economic. Major global corporations such as Walmart and Starbucks report their economic per­formance in their annual reports and their social and environmental performance in their global responsibility reports (also called corporate social responsibility reports). As we mentioned ear­lier, many actions taken

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Sustainability and Supply Chain Drivers

Opportunities for improving supply chain sustainability can be identified by matching the social (workforce, customer, society) and environmental (resource reduction, emission reduction, prod­uct innovation) pillars we have described with the various supply chain drivers discussed in this text. The goal is for every firm to measure its environmental impact for each driver along each of

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Closed-Loop Supply Chains

As we discussed earlier, supply chains typically cause significant harm to the environment when their output ends up in a landfill. One of the biggest opportunities to improve sustainability is for firms to design products that use fewer resources and can be recycled and remanufactured after use. An example of a commonly remanufactured product

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The Pricing of Sustainability in a Supply Chain

For individuals and firms to focus on sustainability, it is crucial that they internalize the “mone­tary value” of the social or environmental cost of their actions. Firms are structured to naturally account for all factors that they have to pay for. Every effort is put into place to reduce these costs. For example, firms

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