Chapter 15- Sourcing Decisions in a Supply Chain

Chapter 15 & 16 Name: Institution: Date: Chapter 15- Sourcing Decisions in a Supply Chain Explain the difference between buyback contract and quantity flexibility Buyback contracts and quantity flexibility are risk-sharing approaches that are used by retailers and suppliers to increase their profits. Buyback contracts allow a retailer to return unsold inventory up to a specified amount at an agreed-upon price. On the other hand, quantity flexibility contracts allow the buyer to modify the order (within limits) after observing demand. Quantity flexibility contracts have an advantage over buyback contracts because they have lower levels of misleading demand information. 2. Design collaboration with suppliers can help a firm reduce cost, improve quality and decrease time to market. Support this statement with a brief explanation. What are the best practices for an effective design collaboration? Design collaboration helps firms reduce cost, improve quality and decrease time to market. These performance metrics are influenced by suppliers since 50-70 percent of a manufacturer’s expenditure is through procurement. Thus, manufacturers using design collaboration can strategically reduce their cost of acquiring some products, they can improve quality because they can conveniently select the best quality offers from the market and can beat time to market. They beat time to market because they can always get faster services from their collaborators especially if time was a priority for the collaboration. Some best practices for effective collaboration: Collaborate to attain a win-win situation for both parties. Each party should feel like a beneficiary for each collaboration. If the collaboration is a win-win for each party, they will each invest their efforts to extract their benefits and it will help both parties in the long term. Collaborate for the long term – both parties should be aiming at a long-term collaboration. Short term collaboration tends to be more expensive and with limited beneficiaries to both parties. For long term collaboration, the parties would optimize their services and operations and hence increase their profit margins. Establish a robust joint-performance management system- since the collaboration is between two entities with different management approaches and operations, there is a need for a team to oversee the operations of the collaboration. The team should be made up of individuals from both parties. A joint team builds common metrics and targets and jointly monitors the progress of the collaboration. Chapter 16 – Pricing and Revenue Management in a Supply Chain 1. What do you understand by dynamic pricing? Discuss its application in the airline industry. Dynamic pricing can be defined as differential pricing of products such that they generally increase the level of product availability for the consumer willing to pay full price. The strategy increases the profits for the retailer who exploits the advantage of full pricing to the consumers willing to pay but still pro...