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Outsourcing Through Competition: What Is The Best Competition Parameter?, Ehsan Elahi
Outsourcing Through Competition: What Is The Best Competition Parameter?, Ehsan Elahi
Management Science and Information Systems Faculty Publication Series
In this paper we consider a single buyer who wants to outsource the manufacturing of a product to N potential suppliers. The buyer’s objective is to maximize the service level she receives from the suppliers. The suppliers compete for the buyer’s demand based on a competition parameter which the buyer announces along with an allocation rule. We model each supplier as a make-to-stock queueing system. Using a simple proportional allocation function, we compare two competition parameters: service level and inventory level. We show that inventory competition creates a higher overall service level for the buyer. We also show an optimal …
Outsourcing To Non-Identical Suppliers Via Service Competition, Ehsan Elahi, Saif Benjaafar, Karen Donohue
Outsourcing To Non-Identical Suppliers Via Service Competition, Ehsan Elahi, Saif Benjaafar, Karen Donohue
Management Science and Information Systems Faculty Publication Series
In this paper, we consider a single buyer who wishes to outsource a fixed demand for a manufactured good or service at a fixed price to a set of N suppliers. We examine the value of competition as a mechanism for the buyer to elicit good service quality from her suppliers. In particular, we consider a scheme in which the buyer allocates a proportion of demand to each supplier, with the proportion a supplier receives increasing in the service level she offers. Suppliers compete for expected market share, which increases in the offered service level. The suppliers affect their service …