Competing manufacturers in a retail supply chain: On contractual form and coordination

It is common for a retailer to sell products from competing manufacturers. How then should the firms manage their contract negotiations? The supply chain coordination literature focuses either on a single manufacturer selling to a single retailer or one manufacturer selling to many (possibly competing) retailers. We find that some key conclusions from those market structures do not apply in our setting, where multiple manufacturers sell through a single retailer. We allow the manufacturers to compete for the retailer's business using one of three types of contracts: a wholesale-price contract, a quantity-discount contract, or a two-part tariff. It is well known that the latter two, more sophisticated contracts enable the manufacturer to coordinate the supply chain, thereby maximizing the profits available to the firms. More importantly, they allow the manufacturer to extract rents from the retailer, in theory allowing the manufacturer to leave the retailer with only her reservation profit. However, we show that in our market structure these two sophisticated contracts force the manufacturers to compete more aggressively relative to when they only offer wholesale-price contracts, and this may leave them worse off and the retailer substantially better off. In other words, although in a serial supply chain a retailer may have just cause to fear quantity discounts and two-part tariffs, a retailer may actually prefer those contracts when offered by competing manufacturers. We conclude that the properties a contractual form exhibits in a one-manufacturer supply chain may not carry over to the realistic setting in which multiple manufacturers must compete to sell their goods through the same retailer. © 2010 INFORMS.

Improving supply chain performance: Real-time demand information and flexible deliveries

In some supply chains, materials are ordered periodically according to local information. This paper investigates how to improve the performance of such a supply chain. Specifically, we consider a serial inventory system in which each stage implements a local reorder interval policy; i.e., each stage orders up to a local basestock level according to a fixed-interval schedule. A fixed cost is incurred for placing an order. Two improvement strategies are considered: (1) expanding the information flow by acquiring real-time demand information and (2) accelerating the material flow via flexible deliveries. The first strategy leads to a reorder interval policy with full information; the second strategy leads to a reorder point policy with local information. Both policies have been studied in the literature. Thus, to assess the benefit of these strategies, we analyze the local reorder interval policy. We develop a bottom-up recursion to evaluate the system cost and provide a method to obtain the optimal policy. A numerical study shows the following: Increasing the flexibility of deliveries lowers costs more than does expanding information flow; the fixed order costs and the system lead times are key drivers that determine the effectiveness of these improvement strategies. In addition, we find that using optimal batch sizes in the reorder point policy and demand rate to infer reorder intervals may lead to significant cost inefficiency. © 2010 INFORMS.

Methane contamination of drinking water accompanying gas-well drilling and hydraulic fracturing.

Directional drilling and hydraulic-fracturing technologies are dramatically increasing natural-gas extraction. In aquifers overlying the Marcellus and Utica shale formations of northeastern Pennsylvania and upstate New York, we document systematic evidence for methane contamination of drinking water associated with shale-gas extraction. In active gas-extraction areas (one or more gas wells within 1 km), average and maximum methane concentrations in drinking-water wells increased with proximity to the nearest gas well and were 19.2 and 64 mg CH(4) L(-1) (n = 26), a potential explosion hazard; in contrast, dissolved methane samples in neighboring nonextraction sites (no gas wells within 1 km) within similar geologic formations and hydrogeologic regimes averaged only 1.1 mg L(-1) (P < 0.05; n = 34). Average δ(13)C-CH(4) values of dissolved methane in shallow groundwater were significantly less negative for active than for nonactive sites (-37 ± 7‰ and -54 ± 11‰, respectively; P < 0.0001). These δ(13)C-CH(4) data, coupled with the ratios of methane-to-higher-chain hydrocarbons, and δ(2)H-CH(4) values, are consistent with deeper thermogenic methane sources such as the Marcellus and Utica shales at the active sites and matched gas geochemistry from gas wells nearby. In contrast, lower-concentration samples from shallow groundwater at nonactive sites had isotopic signatures reflecting a more biogenic or mixed biogenic/thermogenic methane source. We found no evidence for contamination of drinking-water samples with deep saline brines or fracturing fluids. We conclude that greater stewardship, data, and-possibly-regulation are needed to ensure the sustainable future of shale-gas extraction and to improve public confidence in its use.

Why the World Suddenly Cares About Global Supply Chains

The global value chain (GVC) concept has gained popularity as a way to analyze the international expansion and geographical fragmentation of contemporary supply chains and value creation and capture therein. It has been used broadly in academic publications that examine a wide range of global industries, and by many of the international organizations concerned with economic development. This note highlights some of the main features of GVC analysis and discusses the relationship between the core concepts of governance and upgrading. The key dynamics of contemporary global supply chains and their implications for global production and trade are illustrated by: (1) the consolidation of global value chains and the new geography of value creation and capture, with an emphasis on China; (2) the key roles of global supermarkets and private standards in agri-food supply chains; and (3) how the recent economic crisis contributes to shifting end markets and the regionalization of value chains. It concludes with a discussion of the future direction of GVC analysis and a potential collaboration with supply chain researchers. © 2012 Institute for Supply Management, Inc.

NAFTA and the apparel commodity chain: Corporate strategies, interfirm networks, and industrial upgrading

The apparel industry is one of the oldest and largest export industries in the world, with global trade and production networks that connect firms and workers in countries at all levels of economic development. This chapter examines the impact of the North American Free Trade Agreement (NAFTA) as one of the most recent and significant developments to affect patterns of international trade and production in the apparel and textile industries. Tr ade policies are changing the institutional environment in which firms in this industry operate, and companies are responding to these changes with new strategies designed to increase their profitability and strengthen their control over the apparel commodity chain. Our hypothesis is that lead firms are establishing qualitatively different kinds of regional production networks in North America from those that existed prior to NAFTA, and that these networks have important consequences for industrial upgrading in the Mexican textile and apparel industries. Post-NAFTA crossborder production arrangements include full-package networks that link lead firms in the United States with apparel and textile manufacturers, contractors, and suppliers in Mexico. Full-package production is increasing the local value added provided by the apparel commodity chain in Mexico and creating new opportunities for Mexican firms and workers. The chapter is divided into four main sections. The first section uses trade and production data to analyze shifts in global apparel flows, highlighting the emergence and consolidation of a regional trade bloc in North America. The second section discusses the process of industrial upgrading in the apparel industry and introduces a distinction between assembly and full-package production networks. The third section includes case studies based on published industry sources and strategic interviews with several lead companies whose strategies are largely responsible for the shifting trade patterns and NAFTA-inspired cross-border production networks discussed in the previous section. The fourth section considers the implications of these changes for employment in the North American apparel industry. © 2009 by Temple University Press. All rights reserved.

Economic and Social Upgrading in Global Value Chains and Industrial Clusters: Why Governance Matters

© 2014, Springer Science+Business Media Dordrecht.The burgeoning literature on global value chains (GVCs) has recast our understanding of how industrial clusters are shaped by their ties to the international economy, but within this context, the role played by corporate social responsibility (CSR) continues to evolve. New research in the past decade allows us to better understand how CSR is linked to industrial clusters and GVCs. With geographic production and trade patterns in many industries becoming concentrated in the global South, lead firms in GVCs have been under growing pressure to link economic and social upgrading in more integrated forms of CSR. This is leading to a confluence of “private governance” (corporate codes of conduct and monitoring), “social governance” (civil society pressure on business from labor organizations and non-governmental organizations), and “public governance” (government policies to support gains by labor groups and environmental activists). This new form of “synergistic governance” is illustrated with evidence from recent studies of GVCs and industrial clusters, as well as advances in theorizing about new patterns of governance in GVCs and clusters.

Future requirements for and supply of ophthalmologists for an aging population in Singapore.

BACKGROUND: Singapore's population, as that of many other countries, is aging; this is likely to lead to an increase in eye diseases and the demand for eye care. Since ophthalmologist training is long and expensive, early planning is essential. This paper forecasts workforce and training requirements for Singapore up to the year 2040 under several plausible future scenarios. METHODS: The Singapore Eye Care Workforce Model was created as a continuous time compartment model with explicit workforce stocks using system dynamics. The model has three modules: prevalence of eye disease, demand, and workforce requirements. The model is used to simulate the prevalence of eye diseases, patient visits, and workforce requirements for the public sector under different scenarios in order to determine training requirements. RESULTS: Four scenarios were constructed. Under the baseline business-as-usual scenario, the required number of ophthalmologists is projected to increase by 117% from 2015 to 2040. Under the current policy scenario (assuming an increase of service uptake due to increased awareness, availability, and accessibility of eye care services), the increase will be 175%, while under the new model of care scenario (considering the additional effect of providing some services by non-ophthalmologists) the increase will only be 150%. The moderated workload scenario (assuming in addition a reduction of the clinical workload) projects an increase in the required number of ophthalmologists of 192% by 2040. Considering the uncertainties in the projected demand for eye care services, under the business-as-usual scenario, a residency intake of 8-22 residents per year is required, 17-21 under the current policy scenario, 14-18 under the new model of care scenario, and, under the moderated workload scenario, an intake of 18-23 residents per year is required. CONCLUSIONS: The results show that under all scenarios considered, Singapore's aging and growing population will result in an almost doubling of the number of Singaporeans with eye conditions, a significant increase in public sector eye care demand and, consequently, a greater requirement for ophthalmologists.

Impacts of land use change and climate variations on annual inflow into Miyun Reservoir,Beijing, China

The Miyun Reservoir, the only surface water source for Beijing city, has experienced water supply decline in recent decades. Previous studies suggest that both land use change and climate contribute to the changes of water supply in this critical watershed. However, the specific causes of the decline in the Miyun Reservoir are debatable under a non-stationary climate in the past 4 decades. The central objective of this study was to quantify the separate and collective contributions of land use change and climate variability to the decreasing inflow into the Miyun Reservoir during 1961–2008. Different from previous studies on this watershed, we used a comprehensive approach to quantify the timing of changes in hydrology and associated environmental variables using the long-term historical hydrometeorology and remote-sensing-based land use records. To effectively quantify the different impacts of the climate variation and land use change on streamflow during different sub-periods, an annual water balance model (AWB), the climate elasticity model (CEM), and a rainfall–runoff model (RRM) were employed to conduct attribution analysis synthetically. We found a significant (p  <  0.01) decrease in annual streamflow, a significant positive trend in annual potential evapotranspiration (p  <  0.01), and an insignificant (p  >  0.1) negative trend in annual precipitation during 1961–2008. We identified two streamflow breakpoints, 1983 and 1999, by the sequential Mann–Kendall test and double-mass curve. Climate variability alone did not explain the decrease in inflow to the Miyun Reservoir. Reduction of water yield was closely related to increase in actual evapotranspiration due to the expansion of forestland and reduction in cropland and grassland, and was likely exacerbated by increased water consumption for domestic and industrial uses in the basin. The contribution to the observed streamflow decline from land use change fell from 64–92 % during 1984–1999 to 36–58 % during 2000–2008, whereas the contribution from climate variation climbed from 8–36 % during the 1984–1999 to 42–64 % during 2000–2008. Model uncertainty analysis further demonstrated that climate warming played a dominant role in streamflow reduction in the most recent decade (i.e., 2000s). We conclude that future climate change and variability will further challenge the water supply capacity of the Miyun Reservoir to meet water demand. A comprehensive watershed management strategy needs to consider the climate variations besides vegetation management in the study basin.