Symbolic Awards in Buyer–Supplier Relations

2021 ◽  
Author(s):  
Ruth Beer ◽  
Hyun-Soo Ahn ◽  
Stephen Leider
Keyword(s):  
Laboratory Experiments ◽  
Problem Definition ◽  
Practical Relevance ◽  
Negative Effects ◽  
Bottom Line ◽  
Managerial Implications ◽  
The Cost ◽  
Behavioral Mechanisms ◽  
The Relationship ◽  
High Effort

Problem definition: Giving out a symbolic “supplier of the year” or “outstanding supplier” award can be beneficial for a buyer as it may incentivize a supplier to exert higher efforts. However, when a good supplier is scarce, the award announces which supplier is particularly good and may increase the cost of building and maintaining the relationship. This paper studies both positive and negative effects of a symbolic award and offers explanations on underlying behavioral mechanisms. Academic/practical relevance: We show that symbolic awards can effectively incentivize suppliers to provide high effort, improving a buyer’s bottom line. This is particularly relevant in cases in which certain aspects of a buyer–supplier relationship are not contractible and suppliers have discretion over the quality provided. The award format significantly influences the award’s effectiveness. Methodology: We develop a game-theoretical model that captures a supplier’s utility for the award in a competitive setting and test the predictions of the model with laboratory experiments. Results: Our experimental results confirm that private symbolic awards have motivating effects and lead to higher buyer profits. When the awards are public, this profit premium diminishes as buyers pay higher prices to get the good suppliers. When the buyer is given the option to make the award public or private, buyers prefer that awards are public over private, anticipating a negative supplier response to their choice of the private award format. Managerial implications: Expressing praise or gratitude for a supplier’s efforts can be highly beneficial for a buyer. However, when there is scarcity of good suppliers, buyers should expect increased competition and accompany the award with efforts to preserve the relationship. Finally, if buyers choose to offer a distinctive award format, private recognitions may be perceived as greedy or self-interested and backfire.

scholarly journals Centralized and Decentralized Warehouse Logistics Collaboration

2020 ◽  
Vol 22 (4) ◽  
pp. 812-831 ◽  
Author(s):  
Shiman Ding ◽  
Philip M. Kaminsky
Keyword(s):  
Lower Bound ◽  
Transportation Cost ◽  
Problem Definition ◽  
Cost Ratio ◽  
Computational Studies ◽  
Practical Relevance ◽  
Grocery Industry ◽  
Ordering Policy ◽  
Managerial Implications ◽  
The Cost

Problem definition: We bound the value of collaboration in a decentralized multisupplier multiretailer setting, where several suppliers ship to several retailers through a shared warehouse, and outbound trucks from the warehouse contain the products of multiple suppliers. Academic/practical relevance: In an emerging trend in the grocery industry, multiple suppliers and retailers share a warehouse to facilitate horizontal collaboration, lower transportation costs, and increase delivery frequencies. Thus far, these so-called mixing and consolidation centers are operated in a decentralized manner, with little effort to coordinate shipments from multiple suppliers with shipments to multiple retailers. Facilitating collaboration in this setting would be challenging (both technically and in terms of the level of trust that would be necessary), so it is useful to understand the potential gains of collaboration. Methodology: We extend the classic one-warehouse multiretailer analysis to incorporate multiple suppliers and per-truck outbound transportation cost from the warehouse and develop a cost lower bound on centralized operation as benchmark. We then analyze decentralized versions of the system, in which each retailer and each supplier maximizes his or her own utility in a variety of settings, and we analytically bound the ratio of the cost of decentralized to centralized operation to bound the loss resulting from decentralization. Results: We find analytical bounds on the performance of several decentralized policies. The best, a decentralized zero-inventory ordering policy, has a cost ratio when compared with a lower bound on the centralized policy of no more than 3/2. In computational studies, we find that costs of decentralized policies are even closer to those of centralized policies. Managerial implications: Easy-to-implement decentralized policies are efficient and effective in this setting, suggesting that centralization (and thus a potentially complex and expensive coordination effort) is unlikely to result in significant benefits.

Contextual Trustworthiness of Organizational Partners: Evidence from Nine School Networks

2020 ◽  
Author(s):  
Samantha M. Keppler ◽  
Karen R. Smilowitz ◽  
Paul M. Leonardi
Keyword(s):  
Qualitative Study ◽  
Contextual Factors ◽  
Problem Definition ◽  
Practical Relevance ◽  
High Quality ◽  
School Networks ◽  
12Th Grade ◽  
Service Relationships ◽  
Managerial Implications ◽  
The Relationship

Problem definition: Trustworthy partners in procurement and service relationships are an asset. How can organizations discern trustworthy from untrustworthy partners, especially early on, so as to not waste time or resources on bad relationships? Academic/practical relevance: Like prior studies, we take the perspective that organizations rarely know whether a partner is trustworthy, but also that organizations often have some evidence of a partner’s trustworthiness, even before interacting. We argue a qualitative study is needed to understand how people discern a partner’s trustworthiness and the consequences of initial perceptions on the relationship trajectory. Methodology: We conduct an interview-based study of how people discern trustworthy partners in a setting where doing so is challenging: the education sector. Kindergarten-through-12th-grade schools must choose outside partners to rely on for resources or services the school cannot afford. Potential partners are numerous and of variable trustworthiness. Results: We find people use contextual factors as evidence of a potential partner’s trustworthiness, such as the partner’s institutional affiliations, physical proximity, and relationships with other schools. Sometimes the evidence indicates that a partner acts intrinsically trustworthily, regardless of these contextual factors. In other cases, the evidence indicates a partner acts contextually trustworthily, meaning partners follow through in some conditions but not others. Intrinsically trustworthy partners provide valuable but standardized resources or services. Contextually trustworthy partners provide the competitive advantage: customized resources that are not easily accessible by other schools. Managerial implications: People in organizations identify trustworthy partners via contextual factors, which helps them determine whether a partner acts trustworthily independent of context or conditional on context. The value of intrinsically trustworthy partners derives from their low risk and high quality, whereas the value of contextually trustworthy partners derives from their willingness to customize resources or services to some—but not all—organizations.

Self-Interested Giving: The Relationship Between Conditional Gifts, Charitable Donations, and Donor Self-Interestedness

2021 ◽  
Author(s):  
Matthew Chao ◽  
Geoffrey Fisher
Keyword(s):  
Decision Analysis ◽  
Experimental Evidence ◽  
Laboratory Experiments ◽  
Self Report ◽  
Negative Effects ◽  
Charitable Donations ◽  
Prosocial Motives ◽  
The Gift ◽  
Other Regarding ◽  
The Relationship

Nonprofits regularly use conditional “thank you” gifts to entice prospective donors to give, yet experimental evidence suggests that their effects are mixed in practice. This paper uses multiple laboratory experiments to test when and why thank you gifts vary in effectiveness. First, we demonstrate that although gifts often increase donations to charities that donors did not rate highly, many of the same gifts had no effects or negative effects for charities that prospective donors already liked. We replicate these findings in a second experiment that uses a different range of charity and gift options as well as different measures of participant perceptions of a charity. We also find that making gifts optional, as is common in fundraising campaigns, does not eliminate these negative gift effects. In additional experiments, we directly test for donor motives using self-report and priming experiments. We find that thank you gifts increase (decrease) the weight that donors place on self-interested (prosocial) motives, leading to changes in donation patterns. Altogether, our results suggest that practitioners may find gifts more useful when appealing to donors not already familiar with or favorably inclined to their charity, such as during donor acquisition campaigns. They may be less useful when appealing to recent donors or others who already favor the charity, in part because the gift may activate mindsets or norms that emphasize self-interested motives instead of more prosocial, other-regarding motives. This paper was accepted by Yan Chen, decision analysis.

Negotiating Government-to-Government Food Importing Contracts: A Nash Bargaining Framework

2021 ◽  
Author(s):  
Liying Mu ◽  
Bin Hu ◽  
A. Amarender Reddy ◽  
Srinagesh Gavirneni
Keyword(s):  
Ad Hoc ◽  
Developing Nations ◽  
Problem Definition ◽  
Pool Size ◽  
Nash Bargaining ◽  
Practical Relevance ◽  
Negotiation Model ◽  
Multiple Sourcing ◽  
Managerial Implications ◽  
Better Than

Problem definition: Inspired by India’s challenges in importing pulses, we study the negotiation of government-to-government food importing contracts, with a focus on ad hoc and forward negotiations with multiple suppliers (henceforth referred to as multiple-sourcing negotiations). Academic/practical relevance: We are the first to comprehensively study ad hoc and forward multiple-sourcing negotiations for food importing. Such problems are widespread, especially in developing nations, and thus the research can be relevant to the wellbeing of large underprivileged populations. Methodology: We develop an analytical negotiation model in the Nash bargaining framework and adopt the Nash-in-Nash framework to analyze multiple-sourcing negotiations. Results: We find that while forward negotiations are not necessarily better than ad hoc negotiations for the buyer, it would be true with sufficiently many suppliers. When facing a supplier pool, we show that it may be optimal to mix forward and ad hoc suppliers. In general, fewer suppliers should be assigned as ad hoc as the pool size increases. We also find that adding a hybrid supplier (engaged in a forward negotiation with an ad hoc negotiation as the fallback option) may be better or worse than adding a forward supplier in the presence of other suppliers. Managerial implications: Our findings inform how a food importer should strategically utilize ad hoc and forward negotiations with its suppliers to improve the outcome. The work may help countries’ food importing policymaking and strategies and may improve the wellbeing of large underprivileged populations.

Competition and the Winner's Curse in B2B Reverse Auctions

2011 ◽  
pp. 150-165
Author(s):  
Indranil K. Ghosh ◽  
John L. Fizel ◽  
Ido Millet ◽  
Diane H. Parente
Keyword(s):  
Theoretical Background ◽  
Procurement Auctions ◽  
Future Research ◽  
Winner's Curse ◽  
Negative Effects ◽  
Diverse Range ◽  
Winner’S Curse ◽  
Managerial Implications ◽  
The Given ◽  
The Relationship

The Winner’s Curse is a common phenomenon mostly in auctions, even though it has applications in a diverse range of fields. We define the idea of a Winner’s Curse and specify the types of auctions in which this could be prevalent. We look at the data provided by a major multinational corporation on online procurement auctions conducted by them. We specify the relationship that the prevalence of the Winner’s Curse would have on the success of such procurement auctions. Using this theoretical background, we analyze the given data and show that in some cases, the presence of the Winner’s Curse and the subsequent need for bidders to show caution in the presence of the Winner’s Curse could lead to lower auction success for the firm. We specify the particular cases where this is true. This leads to Managerial Implications for firms wishing to conduct procurement auctions online and we spell them out. We also provide some examples of how firms might try and lower the negative effects of the Winner’s Curse. Finally we provide some future research ideas that may be pursued and some additional readings for the curious reader.

scholarly journals Understanding the Value of Fulfillment Flexibility in an Online Retailing Environment

2021 ◽  
Author(s):  
Levi DeValve ◽  
Yehua Wei ◽  
Di Wu ◽  
Rong Yuan
Keyword(s):  
Theoretical Analysis ◽  
Numerical Simulations ◽  
Problem Definition ◽  
Order Fulfillment ◽  
Distribution Centers ◽  
Online Retailing ◽  
New Class ◽  
Managerial Implications ◽  
The Cost ◽  
Improve Service Quality

Problem definition: Fulfillment flexibility, the ability of distribution centers (DCs) to fulfill demand originating from other DCs, can help e-retailers reduce lost sales and improve service quality. Because the cost of full flexibility is prohibitive, we seek to understand the value of partially flexible fulfillment networks under simple and effective fulfillment policies. Academic/practical relevance: We propose a general method for understanding the practical value of (partial) fulfillment flexibility using a data-driven model, theoretical analysis, and numerical simulations. Our method applies to settings with local fulfillment (i.e., order fulfillment from the originating DC) prioritization and possible customer abandonment, two features that are new to the fulfillment literature. We then apply this method for a large e-retailer. We also introduce a new class of spillover limit fulfillment policies with attractive theoretical and practical features. Methodology: Our analysis uses dynamic and stochastic optimization, applied probability, and numerical simulations. Results: We derive optimal fulfillment policies in stylized settings, as well as bounds on the performance under an optimal policy using theoretical analysis, to provide guidelines on which policies to test in numerical simulations. We then use simulations to estimate for our industrial partner that a proposed fulfillment network with additional flexibility equates to a profit improvement on the order of tens of millions of U.S. dollars. Managerial implications: We provide an approach for e-retailers to understand when fulfillment flexibility is most valuable. We find that fulfillment flexibility provides the most benefit for our collaborator when gross profits are high relative to fulfillment costs or centrally held inventory is low. Also, we identify the risks of myopic fulfillment with additional flexibility and demonstrate that an effective spillover limit policy mitigates these risks.

scholarly journals Bridging the Financial Gap Among Young People

2020 ◽  
Vol 9 (1) ◽  
Author(s):  
Hannah Torres ◽  
Russell Rudman
Keyword(s):  
United States ◽  
Low Income ◽  
College Graduates ◽  
The United States ◽  
Student Loan ◽  
Negative Effects ◽  
Financial Decisions ◽  
The Subject ◽  
The Cost ◽  
The Relationship

Experts have determined that the cost of attending college is rising (Williams, 2006) and as a result, it has altered college graduates’ cumulative debt levels. In addition, research shows that those who attend college are more likely to earn higher salaries (Ma et al., 2016). Consequently, the existence of a low-income college graduate population would be considered a paradox. Simultaneous to such changes mentioned, homeownership among young individuals is declining in the United States (Dettling & Hsu, 2014). As of today, research has focused on the relationship between student loan debt and homeownership but has neglected the relationship between cumulative debt and homeownership. This study will answer the following question: What is the relationship between cumulative debt acquired by low-income college graduates between the ages of 23-40 in the United States in the 21st century and the corresponding likelihood of homeownership? Through interviews with five low-income college graduates, I collected narratives describing their outlooks on cumulative debt and its influences on homeownership. Through thematic analysis, I drew connections between common themes that indicated how cumulative debt affected one’s actions or thoughts regarding purchasing a home.  The results showed that cumulative debt has negative effects on homeownership. Subjects disclosed that their struggle to pay their cumulative debt and inability to accumulate wealth were the two most common hindrances of purchasing a home. This is significant because cumulative debt predetermines how the subject manages their finances to pursue purchasing a home and such data may influence the financial decisions of future generations.

AI and Procurement

2021 ◽  
Author(s):  
Ruomeng Cui ◽  
Meng Li ◽  
Shichen Zhang
Keyword(s):  
Price Discrimination ◽  
Recommendation System ◽  
Wholesale Price ◽  
Problem Definition ◽  
Practical Relevance ◽  
Trading Company ◽  
Smart Control ◽  
Managerial Implications ◽  
The Impact ◽  
Price Quotes

Problem definition: In this research, we study how buyers’ use of artificial intelligence (AI) affects suppliers’ price quoting strategies. Specifically, we study the impact of automation—that is, the buyer uses a chatbot to automatically inquire about prices instead of asking in person—and the impact of smartness—that is, the buyer signals the use of a smart AI algorithm in selecting the supplier. Academic/practical relevance: In a world advancing toward AI, we explore how AI creates and delivers value in procurement. AI has two unique abilities: automation and smartness, which are associated with physical machines or software that enable us to operate more efficiently and effectively. Methodology: We collaborate with a trading company to run a field experiment on an online platform in which we compare suppliers’ wholesale price quotes across female, male, and chatbot buyer types under AI and no recommendation conditions. Results: We find that, when not equipped with a smart control, there is price discrimination against chatbot buyers who receive a higher wholesale price quote than human buyers. In fact, without smartness, automation alone receives the highest quoted wholesale price. However, signaling the use of a smart recommendation system can effectively reduce suppliers’ price quote for chatbot buyers. We also show that AI delivers the most value when buyers adopt automation and smartness simultaneously in procurement. Managerial implications: Our results imply that automation is not very valuable when implemented without smartness, which in turn suggests that building smartness is necessary before considering high levels of autonomy. Our study unlocks the optimal steps that buyers could adopt to develop AI in procurement processes.

Interrelations among rock lobsters, sea urchins, and juvenile abalone: implications for community management

2000 ◽  
Vol 57 (11) ◽  
pp. 2175-2185 ◽  
Author(s):  
Stephen Mayfield ◽  
George M Branch
Keyword(s):  
South African ◽  
Laboratory Experiments ◽  
Sea Urchins ◽  
Ecosystem Approach ◽  
Community Management ◽  
Rock Lobster ◽  
Negative Effects ◽  
Major Threat ◽  
Complex Interactions ◽  
The Relationship

Field and laboratory experiments demonstrate that juveniles of South African abalone (Haliotis midae) depend vitally on the protection from predation that they gain from living concealed beneath Cape urchins (Parechinus angulosus). Recent reports suggest that rock lobsters (Jasus lalandii) have increased substantially in the region where the commercial abalone fishery is centered. This increase has been blamed for a recorded collapse of urchin populations and dramatic reductions in the numbers of juvenile abalone. We verified the substantial increase in rock lobster abundance there. Surveys covering 200 km of coastline showed that densities of urchins were negatively correlated with those of large lobsters (>68 mm carapace length) and that densities of juvenile abalone were positively correlated with those of urchins. The indirect negative effects of rock lobsters on juvenile abalone clearly pose a major threat to the abalone industry, already under stress from poaching. Quantification of the relationship between juvenile abalone and urchins and between urchins and rock lobsters allows a forecast of the magnitude of lobster harvesting necessary to reduce them to a level at which urchins may recover and sustain juvenile abalone. The complex interactions involved emphasize the importance of an ecosystem approach for the management of these stocks.

Unraveling Behavioral Ordering: Relative Costs and the Bullwhip Effect

2021 ◽  
Author(s):  
Brent B. Moritz ◽  
Arunachalam Narayanan ◽  
Chris Parker
Keyword(s):  
Supply Chain ◽  
Information Sharing ◽  
Human Behavior ◽  
Bullwhip Effect ◽  
Problem Definition ◽  
Supply Chain Costs ◽  
Cost Impact ◽  
Managerial Implications ◽  
The Cost ◽  
The Impact

Problem definition: We study the bullwhip effect and analyze the impact of human behavior. We separate rational ordering in response to increasing incoming orders from irrational ordering. Academic/practical relevance: Prior research has shown that the bullwhip effect occurs in about two-thirds of firms and impacts profitability by 10%–30%. Most bullwhip mitigation efforts emphasize processes such as information sharing, collaboration, and coordination. Previous work has not been able to separate the impact of behavioral ordering from rational increases in order quantities. Methodology: Using data from a laboratory experiment, we estimate behavioral parameters from three ordering models. We use a simulation to evaluate the cost impact of bullwhip behavior on the supply chain and by echelon. Results: We find that cost increases are not equally shared. Human biases (behavioral ordering) at the retailer results in higher relative costs elsewhere in the supply chain, even as similar ordering by a wholesaler, distributor, or factory results in increased costs within that echelon. These results are consistent regardless of the behavioral models that we consider. The cognitive profile of the decision maker impacts both echelon and supply chain costs. We show that the cost impact is higher as more decision makers enter a supply chain. Managerial implications: The cost of behavioral ordering is not consistent across the supply chain. Managers can use the estimation/simulation framework to analyze the impact of human behavior in their supply chains and evaluate improvement efforts such as coordination or information sharing. Our results show that behavioral ordering by a retailer has an out-sized impact on supply chain costs, which suggests that upstream echelons are better placed to make forecasting and replenishment decisions.

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