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The value of supply chain coordination under moral hazard: A case study of the consumer product supply chain.

ABSTRACT: In this paper, we examine a real-world case related to the consumer product supply chain to analyze the value of supply chain coordination under the condition of moral hazard. Because of the characteristics of a buyback contract scheme employed in the supply chain, the supplier company's sales department encourages retailers to order more inventory to meet their sales target, whereas retailers pay less attention to their inventory level and leftovers at the end of the season. This condition induces moral hazard problems in the operation of the supply chain, as suppliers suffer from huge returns of leftover inventory. This, in turn, is related to the obsolescence of returned inventory, even with penalty terms in the contract for the return of any leftovers. In this study, we show under the current buyback-based supply chain operation, the inventory levels of both the supplier and retailers exceed customer demand and develop vendor-managed inventory (VMI) system with base stock policy to remove any mismatch of supply and demand. A comparison of both systems shows that through the proper coordination of supply chain operations, both suppliers and retailers can gain additional benefits while providing proper services to end customers.

SUBMITTER: Lee Y

PROVIDER: S-EPMC5856342 | biostudies-literature | 2018

REPOSITORIES: biostudies-literature

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The value of supply chain coordination under moral hazard: A case study of the consumer product supply chain.

Lee Yumi Y Song Sang Hwa SH Cheong Taesu T

PloS one 20180316 3

In this paper, we examine a real-world case related to the consumer product supply chain to analyze the value of supply chain coordination under the condition of moral hazard. Because of the characteristics of a buyback contract scheme employed in the supply chain, the supplier company's sales department encourages retailers to order more inventory to meet their sales target, whereas retailers pay less attention to their inventory level and leftovers at the end of the season. This condition indu ...[more]

PMID: 29547625

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Project description:BackgroundThe COVID-19 pandemic has disrupted global health supply chains including manufacturing, storage, and delivery of essential medicines, testing kits, personal protective equipment, and laboratory reagents. We sought to document how pandemic impacted the procurement, prices, and supply chain of medical products in Zimbabwe.MethodsWe conducted semistructured in-depth key informant interviews with 36 health system stakeholders in Zimbabwe involved in medicine procurement. Respondents included pharmacists, regulatory officers, and procurement and supply chain management professionals from public and private sectors.ResultsBefore the COVID-19 pandemic, respondents described experiencing long-standing resource constraints, medicine shortages, foreign currency shortages, and supply chain inefficiencies. The pandemic exacerbated this situation due to supply constraints, export restrictions, medicine shortages, and movement restrictions that disrupted logistical and stock management systems. Competitive bidding and tendering processes experienced reduced participation by international suppliers. Significant price increases were initially observed among internationally shipped medicines and for personal protective equipment to cover additional freight costs. COVID-19 pandemic impacts were moderated by reduced patient demand and lower health services utilization, resulting in fewer supply shocks and less price volatility. Further, health system adaptations such as switching treatment regimens, modifying dispensing schedules based on stock availability, redistributing stock of medicines among facilities, and new service delivery models such as integrated outreach services helped ensure continued patient access to medicines.ConclusionsOur findings highlight the need for policies that ensure continuity in access to health services and medical products, even during a pandemic, by avoiding blanket restrictions on medical product exports and imports. Pooled procurement, especially at regional and global levels, with long-term service agreements may help achieve greater resiliency to supply and price shocks from supply chain disruptions. Interventions across manufacturing, trade, and regulatory policy and service delivery models are also needed for supply chain resiliency.

Dataset Information

The value of supply chain coordination under moral hazard: A case study of the consumer product supply chain.

Publications

The value of supply chain coordination under moral hazard: A case study of the consumer product supply chain.

Similar Datasets

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