The Value of Supply Chain: Lee, Song, & Cheong

The Value of Supply Chain Student’s Name Institution The Value of Supply Chain In the article Lee, Song, & Cheong (2018) examine the value of coordination in supply chain under the condition of moral hazard. The article begins with a concise abstract that gives a summary of its contents. The authors clearly state the problem that they intend to solve through the article. It is evident that the buyback contract employed in the supply chain poses a challenge for suppliers as they suffer from huge leftover inventory that is returned by retailers. The authors offer a solution to this challenge in form of vendor-managed inventory (VMI) system. The authors thus offer a solution a significant problem in the supply chain. In the introduction section of the article, the authors offer a background for the study and also expound on the problem as it relates to supply chain. According to the authors, while contracts between suppliers and retailers in the supply chain can incentivize the parties to work together, the ability of the contracts to coordinate supply chains may be hampered due to incentive conflicts. There is an assumption made by the authors that “no matter how well a contract is designed, it can have negative side effects”. While this is mentioned to emphasize the problem facing the supply chain, it undermines their solution given that suppliers and retailers have to enter into contracts for the VMI system to function well. Nevertheless, the authors offer a convincing argument on the need for a solution given that incentive conflicts and moral hazard are inevitable with a fragmented supply chain. When the supply chain is made of different independent...