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1、CHAPTER FOURTEENDiscussion Questions1. What are some ways that a firm such as Wal-Mart benefits from good sourcing decisions?The bottom line is that good sourcing decisions improve profits for the firm and total supply chain surplus. The authors list of benefits derived from effective sourcing decis
2、ions includes: Better economies of scale can be achieved if orders within a firm are aggregated. More efficient procurement transactions can significantly reduce the overall cost of purchasing. Design collaboration can result in products that arc easier to manufacture and distribute, resulting in lo
3、wer overall costs. Good procurement processes can facilitate coordination with the supplier and improve forecasting and planning (lowering inventories and improving the match of supply and demand). Appropriate supplier contracts can allow for the sharing of risk, resulting in higher profits for both
4、 the supplier and the buyer. Firms can achieve a lower purchase price by increasing competition through the use of auctions.2. What factors lead Wal-Mart to own its trucks although many retailers outsource all their transportation?Wal-Mart is able to run its own fleet of trucks because it can ship T
5、L throughout its supply chain. Wal-Mart shipment sizes are large and the company achieves aggregation across the many retail stores it owns. If Wal-Mart elected to go with a carrier, they might be able to match Wal-Marts costs, but Wal-Mart would cede control to the carrier.3. How can a supplier wit
6、h a lower price end up costing the buyer more than a supplier with a higher price?Lower price can be achieved by sacrificing product quality, product reliability, and process control, which ultimately will cost the outsourcer more than the total variable cost saved. The cost of coordination is often
7、 underestimated; the outsourcer offloads relatively low-skilled labor but increases the burden on mid and upper management in controlling the production. A firm may also lose customer/supplier contact that causes them to miss opportunities that may have been recognized with a more direct relationshi
8、p.4. Explain why, for the same inventory level, a revenue-sharing contract results in lower sales effort from the retailer than if the retailer has paid for the product and is responsible for all remaining inventory.The retailer puts forth a lower sales effort because they are paid less on a per uni
9、t basis to sell items under a revenue sharing contract than under a buyback or a classic retail contract. The manufacturer and retailer agree to share a fraction of the retailers revenue after agreeing on a low wholesale price. The low wholesale price triggers a larger order from the retailer, and t
10、his can increase supply chain surplus if all product is sold. What happens in practice is that the retailer has a smaller upside under the revenue sharing arrangement and loses the incentive to push merchandise.5. For a manufacturer that sells to many retailers, why does a quantity flexibility contr
11、act result in less information distortion than a buy-back contract?A buy-back contract allows a retailer to return unsold inventory to the supplier; the contract will stipulate the maximum amount returnable and the reimbursement amount the retailer will receive. A buy-back contract provides an incen
12、tive for the retailer to place a larger order and make product more available and can increase total supply chain surplus. A downside of buy-back contracts is information distortion, i.e., the supply chain is aware of the retailers orders and not the actual customer demand until the sales period has
13、 ended. This problem is exacerbated by a situation involving multiple retailers each of which holds inventory.A quantity flexibility contract permits the retailer to change the quantity ordered after observing demand; the contracts are similar to buy-back contracts except no returns are required. Wi
14、th a quantity flexibility contract, retailers specify only the range within which they will purchase, well before actual demand arises. The supplier can aggregate inventory across all retailers and build a lower level of surplus inventory. Since retailers order closer to the point of sale when deman
15、d is more visible and less uncertain; the uncertainty is aggregated by a supplier that enjoys lower information distortion.6. Most firms offer their sales force monetary incentives based on exceeding a specified target. What are some pros and cons of this approach? How would you modify these contrac
16、ts to rectify some of the problems?Two incentive oriented contracts discussed in the chapter are the two-part tariff and the threshold contract. The two-part tariff increases sales agent effort by allowing the retailer to acquire product at cost and letting the dealers margin be the supply chain margin. Threshold contracts establish greater rewards for the retailer as total sales reach successively higher brackets. These incentives can increase s
