Today business environment becomes open-ended, chaotic, and out of control. These trends have changed competition among individual companies to competition among supply chains. Then supply chain leaders have to design a new business model and build a new supply chain to implement the business model.
When a firm tries to establish a new supply chain with new product, it is very difficult to persuade suppliers and distributors to share the vision and the risk involved. Behind any partnership agreement or contract, what always matters most is how to share the risk of the new venture. We analyze a PC manufacturer case, which shows us that chain leader has to take a bigger risk to build a new supply chain. A better approach is suggested using a simple model.
Supply chain risks include internal and external risks. Our analytic model focuses on external risks of demand expectation and uncertainty. Internal risks of relationship between partners will be discussed in case study.
We assumed a new product as catalogue style goods in newsboy setting and developed a model of sharing risk between a manufacturer and a retailer. We set penalty return rate, repurchasing price rate as decision variables to share the risk while many researchers have considered only repurchasing price.
The perceptions of demand expectation and uncertainty can be different between manufacturer and retailer. So we introduced the perception gap in the model and analyzed the consequent dynamics of order quantity, wholesale price, and the profits. We conclude that supply chain coordination can be effectively achieved by arranging risk-sharing mechanism between partners. Finally we try to integrate business model to supply chain strategy and risk sharing model.
