Yuliang Yao

Managing supply chain backorders under vendor managed inventory: An incentive approach and empirical analysis

This paper shows how a manufacturer may use an incentive contract with a distributor under a VMI arrangement to gain market share. The manufacturer promises a distributor lower inventory levels in exchange for efforts by the distributor to convert potential lost sales due to stockouts to backorders. Data gathered from a third party provider of information services are then used to illustrate that this incentive arrangement may, at least implicitly, be employed in industry. Our data estimations show that when a manufacturer and distributor are operating under a VMI arrangement, lower inventory at the distributor is associated with a higher conversion rate of lost sales stockouts to backorders.

Private Network EDI vs. Internet Electronic Markets: A Direct Comparison of Fulfillment Performance

Prior literature has documented the performance benefits from the use of electronic data interchange (EDI) and the Internet. Using purchase and fulfillment records from the U.S. governments Federal Supply Service, we provide a direct comparison of performance between a private network EDI channel and an Internet electronic market. Performance is measured using order cycle time and complete orders fulfilled. Our findings show that the Internet-based electronic market outperforms the EDI-based channel on these two important measures. Order cycle times were significantly lower when using the Internet-based electronic market, whereas the percentage of complete shipments was significantly higher after controlling for product, transaction, seller, and buyer-specific factors. The electronic market even outperforms the EDI channel when buyer and transaction characteristics favor the use of EDI. Because EDI is still prevalent in many industries, these results point to the gains that may be realized by switching to the newer technology.

When Acquisition Spoils Retention: Direct Selling vs. Delegation Under CRM

The widespread implementation of customer relationship management technologies in business has allowed companies to increasingly focus on both acquiring and retaining customers. The challenge of designing incentive mechanisms that simultaneously focus on customer acquisition and customer retention comes from the fact that customer acquisition and customer retention are usually separate but intertwined tasks that make providing proper incentives more difficult. The present study develops incentive mechanisms that simultaneously address acquisition and retention of customers with an emphasis on the interactions between them. The main focus of this study is to examine the impact of the negative effect of acquisition on retention, i.e., the spoiling effect, on firm performance under direct selling and delegation of customer acquisition. Our main finding is that the negative effect of acquisition on retention has a significant impact on acquisition and retention efforts and firm profit. In particular, when the customer acquisition and retention are independent, the firms profit is higher under direct selling than under delegation; however, when acquisition spoils retention, interestingly, the firms profit may be higher under delegation. Our analysis also finds that the spoiling effect not only reduces the optimal acquisition effort but may also reduce retention effort under both direct selling and delegation. Comparing the optimal efforts under direct selling and delegation, the acquisition effort is always lower under delegation regardless of the spoiling effect, but the retention effort may be higher under delegation with the spoiling effect. Furthermore, when the customer antagonism effect from price promotions is considered, our main results hold regarding the firms preferences between direct selling and delegation, which demonstrates the robustness of our model. This paper was accepted by Pradeep Chintagunta, marketing.