Direct versus indirect penalties for supply contracts in high-tech industry

Mirjam S. Meijer, Willem van Jaarsveld, Ton de Kok and Christopher S. Tang

European Journal of Operational Research, 2022, vol. 301, issue 1, 203-216

Abstract: Unlike consumer goods industry, a high-tech manufacturer (OEM) often amortizes new product development costs over multiple generations, where demand for each generation is based on advance orders (i.e., known demand) and additional uncertain demand. Also, due to economic regulatory reasons, high-tech OEMs usually source from a single supplier. Relative to the high retail price, the costs for a supplier of producing high-tech components are low. Consequently, incentives are misaligned: the OEM faces relatively high under-stock costs and the supplier faces high over-stock costs.

Keywords: Supply chain management; Supply contracts; High-tech industry; Contingent penalty (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:301:y:2022:i:1:p:203-216

DOI: 10.1016/j.ejor.2021.10.009

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