Strategic Supply Chain Structure Design for a Proprietary Component Manufacturer

    Authors

    Y. Xu; H. Gurnani;R. Desiraju

    Comments

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    Abbreviated Journal Title

    Prod. Oper. Manag.

    Keywords

    supply chain design; proprietary component manufacturer; marketing-operations interface; dual distribution; component supplier; ASSEMBLY SYSTEMS; COMPETITION; CHANNEL; INVENTORY; DEMAND; Engineering, Manufacturing; Operations Research & Management Science

    Abstract

    This paper examines the choice of supply chain structure for a proprietary component manufacturer (PCM). The PCM, who is the sole supply source of a critical component used to assemble an end product, can either provide its component to an original equipment manufacturer (OEM) in the end-product market (component supplier structure), develop the end product exclusively under its own brand (monopoly structure), or provide the component to the OEM as well as develop the end product under its own brand (dual distributor structure). Typically, the end products of the PCM and the OEM will be differentiated, and the OEM tends to have a capability advantage (compared with the PCM) in producing the end product. Our paper studies the impact of this degree of differentiation and capability advantage on the optimal choice of distribution structure. We then investigate how investing in component branding, enhancing the value of the end product, using alternative supply contracts, and product valuation uncertainty influence the PCM's optimal choice of distribution structure.

    Journal Title

    Production and Operations Management

    Volume

    19

    Issue/Number

    4

    Publication Date

    1-1-2010

    Document Type

    Article

    Language

    English

    First Page

    371

    Last Page

    389

    WOS Identifier

    WOS:000279614500001

    ISSN

    1059-1478

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