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Lecture: Who Should Invest in Manufacturers' Cost Reduction in Supply Chains?
2016-4-18
Time: 10:15-11:30am, April 22nd, 2016
Venue: Room 335, School of Economics & Management
Speaker: Prof. HU Qiying, Fudan University
Abstract: Inspired by the practice ofthe Chinese mobile phone industry, we study that in a supply chain consistingof one manufacturer and one retailer, who should invest in the manufacturer'scost reduction: the manufacturer solely, the retailer solely, or both firmscollaboratively or independently? With demand being sensitive to retail priceand sales effort, we define channel powers and cost factors for both firms. Weshow that both firms' collaborative investing is better than independentinvesting and only one firm's investing if and only if the two firms havecomparable channel powers and comparable cost factors. Moreover, a firm prefersto invest in R\&D by itself solely rather than by its partner and even bytwo firms collaboratively if and only if its cost factor is sufficientlysmaller than its partner's. We apply our results to supplier development andget some new findings. As a byproduct, the retailer may get less from the chainprofit, which contradicts the retailer-dominant property in the literature underconsignment contracts with revenue sharing. Finally, all the results are robustto either wholesale price contracts or consignment contracts with revenuesharing.
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