Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/15505
Title: Comparison of two vertical outsourcing structures under push and pull contracts
Authors: Wang, Y 
Niu, B
Guo, P 
Keywords: Control
Delegation
Pull
Push
Three-tier supply chain
Issue Date: 2013
Publisher: Wiley-Blackwell
Source: Production and operations management, 2013, v.23, no.4, p. 610-625 How to cite?
Journal: Production and operations management 
Abstract: In a three-tier supply chain comprising an original equipment manufacturer (OEM), a contract manufacturer (CM), and a supplier, there exist two typical outsourcing structures: control and delegation. Under the control structure, the OEM contracts with the CM and the supplier respectively. Under the delegation structure, the OEM contracts with the CM only and the CM subcontracts with the supplier. We compare the two outsourcing structures under a push contract (whereby orders are placed before demand is realized) and a pull contract (whereby orders are placed after demand is realized). For all combinations of outsourcing structures and contracts, we derive the corresponding equilibrium wholesale prices, order quantities, and capacities. We find that the equilibrium production quantity is higher under control than under delegation for the push contract whereas the reverse holds for the pull contract. Both the OEM and the CM prefer control over delegation under the push contract. However, under the pull contract, the OEM prefers control over delegation whereas the CM and the supplier prefer delegation over control. We also show that for a given outsourcing structure, the OEM prefers the pull contract over the push contract. In extending our settings to a general two-wholesale-price (TWP) contract, we find that when wholesale prices are endogenized decision variables, the TWP contract under our setting degenerates to either a push or a pull contract.
URI: http://hdl.handle.net/10397/15505
ISSN: 1059-1478
EISSN: 1937-5956
DOI: 10.1111/poms.12025
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