Name
Abstract | ||
|---|---|---|
We consider the order-fulfillment process of a supplier producing a customized capital good, such as production equipment, commercial aircraft, medical devices, or defense systems. As is common in these industries, prior to receiving a firm purchase order from the customer, the supplier receives a series of shared forecasts, which are called "soft orders." Facing a stochastic internal manufacturing lead time, the supplier must decide at what time to begin the fulfillment of the order. This decision requires a trade-off between starting too early, leading to potential holding or cancellation costs, and starting too late, leading to potential delay costs. We collect detailed data of shared forecasts, actual purchase orders, production lead times, and delivery dates for a supplier-buyer dyad in the semiconductor equipment supply chain. Under the assumption that the supplier acts rationally, optimally balancing the cancellation, holding, and delay costs, we are able to estimate the corresponding imputed cost parameters based on the observed data. Our estimation results reveal that the supplier perceives the cost of cancellation to be about two times higher and the holding costs to be about three times higher than the delay cost. In other words, the supplier is very conservative when commencing the order fulfillment, which undermines the effectiveness of the overall forecast-sharing mechanism. |
Year | DOI | Venue |
|---|---|---|
2003 | 10.1287/mnsc.49.12.1653.25115 | Management Science |
Keywords | Field | DocType |
actual purchase order,holding cost,firm purchase order,delay cost,imputed cost,potential holding,shared forecast,potential delay cost,order fulfillment,cancellation cost,semiconductor equipment supply chain,corresponding imputed cost parameter,supply chain,supply chain management | Economics,Implicit cost,Supplier relationship management,Holding cost,Microeconomics,Lead time,Supply chain management,Order fulfillment,Supply chain,Purchase order | Journal |
Volume | Issue | ISSN |
49 | 12 | 0025-1909 |
Citations | PageRank | References |
38 | 4.53 | 3 |
Authors | ||
4 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Morris A. Cohen | 1 | 562 | 79.50 |
| Teck H. Ho | 2 | 181 | 17.75 |
| Z. Justin Ren | 3 | 137 | 10.06 |
| Christian Terwiesch | 4 | 816 | 84.00 |