Collaboration in Supply Chains: Design and Effects on Non-Contractual Mechanisms.

As many companies and organizations gain global presence, buyer-supplier relationships become a very important topic in Operations Management. From both buyers’ and suppliers’ perspectives, the success of a supply chain relies on how well these relationships are managed. Contracts and mechanisms which are based on non-cooperative game theoretic models (e.g., zero-sum games), often result in poor outcomes such as poor quality and non-conformance, and hurt buyers and suppliers instead of helping them. Building on game-theoretic frameworks, earlier work in this area has focused mostly on designing contracts that can achieve coordination of the supply chain. In practice, however, not all important aspects of a relationship can be contemplated in a contract. For example, desired quality or service level may be hard to specify. The supplier’s expected reaction in the case of an unforeseen event, like a natural disaster, may also be hard to predetermine in advance. It is particularly in these cases when the nature and continuity of a relationship matter the most. This dissertation focuses on non-contractual aspects of buyer-supplier relationships. I develop behavioral models to analyze industry practices that enhance collaboration in a supply chain, and then test the theoretical models with laboratory experiments. The three chapters of this dissertation identify actions that can be taken by buyers and suppliers to improve the relationship and promote a more efficient supply chain. My three studies answer questions that are important in understanding and designing successful buyer-supplier relationships: How can a buyer identify trustworthy suppliers? How should the buyer reward good suppliers? In which cases should the company invest in developing a long-term relationship with suppliers? I show that higher profits and efficiency can be obtained when 1) suppliers make an upfront buyer-specific investment to signal that they are trustworthy, 2) when buyers reward good suppliers with private symbolic awards, and 3) when suppliers share the benefits of cost reduction investments with long-term partners.PhDBusiness AdministrationUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/116696/1/ruthbeer_1.pd