Value-Based Management of Supplier
Supplier relationship managers often find it difficult to evaluate and optimize supplier relationships, which are crucial to the success of their business yet complex and multifaceted, characterized by long-term orientation, uncertainty, temporal evolution, idiosyncratic investment, improvement potential, and adaptation flexibility. How to design optimal supply contracts to govern supplier relationships has been a common problem in business practice for many years. This book draws on the modern theories of investment under uncertainty in the finance literature and proposes a hierarchical, dynamic and value-based solution for supplier relationship and supply contract management. At the strategic level, the author addresses supplier relationship management by putting forward a three-layer relationship valuation procedure and a fuzzy-stochastic relationship valuation model. In addition, decision models for managing a supplier relationship life cycle as well as configuring and planning supplier relationship portfolios are presented. At the tactical level, the author deals with supply contract management. A general, compound supply contract model is proposed and how to design optimal supply contracts under demand risk and price risk is explored. Furthermore, the contract portfolio configuration problem is discussed.
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allocation analyze Bellman equation Brownian motion business relationship buyer Cachon Chapter compound contract contract component contract consisting contract portfolio contract price contract value decision demand dynamic expected value Figure firm firm’s fixed components flexible component fuzzy binomial tree fuzzy number fuzzy set fuzzy stochastic impact increase instantaneous unit supplier inventory Ito's Lemma joint supply chain joint value literature long-term managerial martingale newsvendor option contracts parameters periodic improvement portfolio configuration portfolio value price risk purchase quantity quantity discount quantity flexibility contract relationship evolution relationship intensity relationship investment relationship life cycle relationship lifetime value relationship objects returns policy revenue sharing specific spot market price stochastic process strategic review period supplier relationship management supplier relationship portfolio supplier relationship value supply chain management supply chain optimal supply chain value supply contracts tactical review period transaction Tsay uncertainty unit supplier value valuation value drivers value-based variables