Supply chain risk-sharing contracts from a buyer's perspective: content and experiences

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Abstract

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Incentive alignment, and risk & gain sharing, are argued to be key factors for successful implementation of supply chain management. Incentive-related issues can be improved by contract-based, information-based, and trust-based solutions. The focus of this article is on contract mechanisms used in the context of high demand volatility, supply allocation and outsourced supply chains. Two case illustrations from high-tech industry (Agilent and Hewlett Packard) describe recently implemented risk sharing contracts, as well as experiences and issues regarding their implementation from a buyers’ perspective. Although the work of implementing these more formal contracts is demanding, buyers are pleased with the results and also reports pleased suppliers. In the cases the main barrier to implementing risk-sharing contracts seems to be the shift in mindset and culture needed internally, especially among purchasers.

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Subject classification (UKÄ) – MANDATORY

  • Transport Systems and Logistics

Keywords

  • information, trust, agency theory, contracts, Supply chain risk sharing, incentive alignment
Original languageEnglish
Pages (from-to)371-393
JournalInternational Journal of Procurement Management
Volume1
Issue number4
Publication statusPublished - 2008
Publication categoryResearch
Peer-reviewedYes

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