Penalty and reward contracts between a manufacturer and its logistics service provider
Contracts are used to coordinate disparate but interdependent members of the supply chain. Conflicting objectives of these members and lack of coordination among the members lead to inefficiencies in matching supply with demand. This study reviews different types of contracts and proposes a methodol...
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| Format: | Article |
| Language: | English |
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BVL
2016-12-01
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| Series: | Logistics Research |
| Subjects: | |
| Online Access: | https://www.bvl.de/lore/all-volumes--issues/volume-9/issue-1/penalty-and-reward-contracts-between-a-manufacturer-and-its-logistics-service-provider |
| _version_ | 1811304408982487040 |
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| author | Emel Aktas Fusun Ulengin |
| author_facet | Emel Aktas Fusun Ulengin |
| author_sort | Emel Aktas |
| collection | DOAJ |
| description | Contracts are used to coordinate disparate but interdependent members of the supply chain. Conflicting objectives of these members and lack of coordination among the members lead to inefficiencies in matching supply with demand. This study reviews different types of contracts and proposes a methodology to be used by companies for analyzing coordinating contracts with their business partners. Efficiency of the contract is determined by comparing the performance of independent companies under the contract to the supply chain performance under the central decision maker assumption. We propose a penalty and reward contract between a manufacturer and its logistics service provider that distributes the manufacturer’s products on its retail network. The proposed contract analysis methodology is empirically tested with transportation data of a consumer durable goods company (CDG) and its logistics service provider (LSP). The results of this case study suggest a penalty and reward contract between the CDG and its LSP that improves not only the individual firm’s objective functions but also the supply chain costs. Compared to the existing situation, the coordination efficiency of the penalty and reward contract is 96.1 %, proving that optimizing contract parameters improves coordination and leads to higher efficiencies. |
| first_indexed | 2024-04-13T08:06:36Z |
| format | Article |
| id | doaj.art-2cb740c0db1b47d1b2dea914db5827f5 |
| institution | Directory Open Access Journal |
| issn | 1865-035X 1865-0368 |
| language | English |
| last_indexed | 2024-04-13T08:06:36Z |
| publishDate | 2016-12-01 |
| publisher | BVL |
| record_format | Article |
| series | Logistics Research |
| spelling | doaj.art-2cb740c0db1b47d1b2dea914db5827f52022-12-22T02:55:08ZengBVLLogistics Research1865-035X1865-03682016-12-019811410.1007/s12159-016-0136-9Penalty and reward contracts between a manufacturer and its logistics service providerEmel Aktas0Fusun Ulengin1 School of Management, Cranfield University, Cranfield, UK School of Management, Sabanci University, Tuzla, TurkeyContracts are used to coordinate disparate but interdependent members of the supply chain. Conflicting objectives of these members and lack of coordination among the members lead to inefficiencies in matching supply with demand. This study reviews different types of contracts and proposes a methodology to be used by companies for analyzing coordinating contracts with their business partners. Efficiency of the contract is determined by comparing the performance of independent companies under the contract to the supply chain performance under the central decision maker assumption. We propose a penalty and reward contract between a manufacturer and its logistics service provider that distributes the manufacturer’s products on its retail network. The proposed contract analysis methodology is empirically tested with transportation data of a consumer durable goods company (CDG) and its logistics service provider (LSP). The results of this case study suggest a penalty and reward contract between the CDG and its LSP that improves not only the individual firm’s objective functions but also the supply chain costs. Compared to the existing situation, the coordination efficiency of the penalty and reward contract is 96.1 %, proving that optimizing contract parameters improves coordination and leads to higher efficiencies.https://www.bvl.de/lore/all-volumes--issues/volume-9/issue-1/penalty-and-reward-contracts-between-a-manufacturer-and-its-logistics-service-providerLogistics contractCase studyNewsvendor problemConsumer durable goods sectorThird-party logistics service provider |
| spellingShingle | Emel Aktas Fusun Ulengin Penalty and reward contracts between a manufacturer and its logistics service provider Logistics Research Logistics contract Case study Newsvendor problem Consumer durable goods sector Third-party logistics service provider |
| title | Penalty and reward contracts between a manufacturer and its logistics service provider |
| title_full | Penalty and reward contracts between a manufacturer and its logistics service provider |
| title_fullStr | Penalty and reward contracts between a manufacturer and its logistics service provider |
| title_full_unstemmed | Penalty and reward contracts between a manufacturer and its logistics service provider |
| title_short | Penalty and reward contracts between a manufacturer and its logistics service provider |
| title_sort | penalty and reward contracts between a manufacturer and its logistics service provider |
| topic | Logistics contract Case study Newsvendor problem Consumer durable goods sector Third-party logistics service provider |
| url | https://www.bvl.de/lore/all-volumes--issues/volume-9/issue-1/penalty-and-reward-contracts-between-a-manufacturer-and-its-logistics-service-provider |
| work_keys_str_mv | AT emelaktas penaltyandrewardcontractsbetweenamanufactureranditslogisticsserviceprovider AT fusunulengin penaltyandrewardcontractsbetweenamanufactureranditslogisticsserviceprovider |