Three essays in supplier management

This dissertation consists of three essays. In the first essay, we introduce a buyer's value functions in both a standard non-reference dependent model and a reference point dependent model to study the buyer's supplier choices over two time periods on a two-attribute space, over price and delivery time guarantee. Homogeneous buyers are considered in a service market. We provide an analysis to show that early entrants can attain a first mover advantage due to the effects of reference point dependence and loss aversion. In addition, we analytically show that buyers may have asymmetric responses to price promotions of the suppliers (i.e., asymmetric patterns of price competition) if buyers are more loss averse on delivery time guarantee than they are on price. We also provide an analysis for asymmetric patterns of competition on delivery time guarantee if buyers have higher loss aversion on price. Some managerial insights are discussed for a competitive service market based on our model analysis.;In the second essay, we consider a practice known as the modular assembly approach, in which a manufacturer acquires pre-assembled modules from its suppliers, rather than the individual components, as in the traditional assembly approach. Our purpose is to study the impact of modular assembly on supply chain efficiency. We first analyze the competitive behavior of a two-stage modular assembly system consisting of a manufacturer and a supplier, who pre-assembles two components into a module. The firms can choose their own inventory policies and we show that there exists a unique Nash equilibrium in the inventory game. We further find that the modular approach generally reduces the cost to the manufacturer and the supply chain, while increases the cost to the supplier(s). These results provide some insight into how firms can improve supply chain efficiency by choosing the right decision structure and lead time configuration.;In the third essay, we study a procurement problem of a buyer who sources an input from a supplier with private cost information. The market demand is uncertain, and the supplier needs to make capacity decisions before demand is realized. The buyer seeks to maximize expected profits, which depend on the procurement price and the allocation of inventory risks between the supply chain members. We first show that there is a continuum set of optimal strategies that covers a full range of inventory risk allocations. Then we consider an alternative mechanism in which the buyer simply sets a procurement price and an order quantity, which is attractively simple to implement. Through analysis and numerical studies, we identify conditions under which the simple mechanism performs well relative to the optimal mechanism. In particular, we find that demand uncertainty plays a critical role in the performance of the simple mechanism.