THE EFFECTS OF INFORMATION SHARING, ORGANIZATIONAL CAPABILITY AND RELATIONSHIP CHARACTERISTICS ON OUTSOURCING
PERFORMANCE IN THE SUPPLY CHAIN: AN EMPIRICAL STUDY
DISSERTATION
Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate
School of The Ohio State University By
Angela (Tidwell) Lewis, MBA ******
The Ohio State University 2006
Dissertation Committee:
Approved by Professor Martha C. Cooper, Co-Adviser
Professor John R. Current, Co-Adviser
Professor A. Michael Knemeyer ___________________________________ Co-Adviser
Graduate Program in Business Administration
___________________________________ Co-Adviser
ii ABSTRACT
Customer-provider relationships become more important as activities are outsourced and business becomes more global. Through a study of the relationships between unpaired third-party logistics (3PLs) providers and
customers, this research addresses how information sharing affects outsourcing performance in the supply chain. Relationship characteristics and organizational capabilities are tested as modifiers in the model as an extension of previous literature, which suggested that those variables influence the strength of the relationship. The quantitative data are derived from surveys of logistics
executives in the United States. Moderated multiple regression analysis is used to test the association between information sharing and perceived outsourcing performance, as well as the interaction effects of organizational capabilities and relationship characteristics. Results indicate that there is a significant
relationship between information sharing and outsourcing performance. The moderator relationship variables of communication and perceived satisfaction with a previous outcome were also significant.
iii
Dedicated to God.
iv
ACKNOWLEDGMENTS
There are several people that I must acknowledge for their support in getting me to this final stage.
First, I wish to thank my advisers, Martha Cooper and John Current, for
encouragement, intellectual support and enthusiasm that made this dissertation possible, and for their patience. This research was supported by the generosity of John Current and Martha Cooper.
I am grateful to A. Michael Knemeyer for providing guidance, refreshing honesty, and constructive feedback while discussing various aspects of this dissertation with me.
I truly appreciate the support of Peter C. Ward, Jeff Pan and Kai Wan, for their help.
I thank my brother and sisters, Todd, Shawn and Wanda; there is no place for my thank you to begin or end. You have been there during the difficult times and the good times along the way. Your presence and prayers have been the greatest gifts of all. I also thank my niece and nephew, Kiersten and Kameron Tidwell, for their unconditional love.
And finally, I must acknowledge my greatest cheerleaders -- my loving parents. I am forever thankful to my parents, Carnell and Ruth Tidwell, who have loved and prayed for me through every journey in my life. Dad and Mom, I love you, you inspire me to go higher.
v VITA
1994 ... BS, Florida A&M University 1997 ... MBA, Washington University 1994 -1995 ...Industrial Engineer,
General Motors Corporation 1997 - 2002 ...Material Supervisor, Project Manager,
General Motors Corporation 2002 - 2005 ... Graduate Teaching and Research Associate,
The Ohio State University
FIELDS OF STUDY Major Field: Business Administration
Minor Field: Supply Chain Management
PUBLICATIONS AND PROCEEDINGS
Martha C. Cooper, Angela Lewis, and John Santosa. "Career Patterns of Women in Logistics," CSCMP 2005 Annual Conference.
Martha C. Cooper and Angela Lewis. “Career Patterns of Women in Logistics,” Mundo Logistico, Roma, MX, November 2005, pp. 80-86.
Martha C. Cooper, John Santosa, Angela Lewis, and Angelisa Gillyard. "Career Patterns of Women in Logistics," Council of Logistics Management Conference Proceedings, 2004.
vi TABLE OF CONTENTS Page Abstract ...ii Dedication ...iii Acknowledgments ...iv Vita ... v
List of Tables ... viii
List of Figures ... x Chapters: 1. Introduction ... 1 1.1 Purpose of Research ... 2 1.2 Problem Statement ... 3 1.3 Information Sharing ... 5 1.4 Outsourcing Performance ... 7 1.5 Relationship Characteristics ... 7 1.6 Research Questions ... 8 1.7 Summary of Introduction... 8 1.8 Outline of Dissertation... 9 2. Literature Review ... 11 2.1 Outsourcing Defined... 12 2.2 Reasons to Outsource... 19
2.3 Measuring Outsourcing Performance... 33
2.4 Information Sharing... 35
2.5 Information Sharing in Supply Chains ... 36
2.6 Summary of Literature Review ... 47
3. Research Methods ... 49
3.1 Hypotheses ... 49
3.2 Model Formulation ... 59
3.3 Data Collection... 65
vii
3.4 Survey Development... 67
3.5 Summary of Research Methods... 71
4. Results and discussion ... 72
4.1 Sample Characteristics ... 72
4.2 Construct Reliability ... 78
4.3 Initial Study Analysis ... 84
4.4 Main Study Results ... 89
4.5 Additional Findings: Organization Type... 96
4.6 Summary of Results... 100
5. Discussion and Conclusion ... 101
5.1 Conclusion Relative to Hypothesis of Information Sharing on Outsourcing Performance ... 102
5.2 Conclusion Relative to Hypothesis of Organizational Capability Moderator... 105
5.3 Conclusion Relative to Hypothesis of Relationship Characteristics Moderator ... 105
5.4 Conclusions Relative to Other Findings ... 106
5.5 Contributions of the Research... 107
5.6 Managerial Implications... 108
5.7 Limitations of the Study ... 109
5.8 Directions for Future Research ... 111
5.9 Summary... 112
Bibliography... 113
Appendices... 124
A. Phase 1 Survey ... 124
B. Phase 2 Survey ... 142
C. Plots of Residual Values... 156
D. Interactions for Gender Differences and Non-Response Bias ... 161
viii
LIST OF TABLES
Table Page
2.1 Outsourcing Definitions ... 16
2.2 Reasons for Outsourcing... 21
2.3 Selected Research Related to Outsourcing from the RBV ... 24
2.4 Selected Information Sharing Research... 41
3.1 Variables for Hypotheses ... 62
4.1 Respondents by Job Title ... 73
4.2 Respondents by Industry... 74
4.3 Respondents who Provided or Purchased Logistical Services... 76
4.4 Descriptive Statistics of Constructs under Study ... 77
4.5 Correlation Matrix for the Combined Study... 78
4.6 Measure of Information Sharing Construct ... 79
4.7 Measure of Organizational Capability Construct ... 80
4.8 Measure of Provider Specific Investment Construct... 81
4.9 Measure of Provider Reputation Construct... 81
ix
4.11 Measure of Communication Construct ... 82
4.12 Measure of Opportunistic Behavior Construct ... 83
4.13 Measure of Outsourcing Performance Construct ... 84
4.14 Regression estimate of information sharing on outsourcing performance.. 85
4.15 Regression estimate of organizational capability on outsourcing performance ... 86
4.16 Regression estimate of relationship characteristics on outsourcing performance ... 88
4.17 Regression Results for Information Sharing ... 90
4.18 Regression Results for Organizational Capability... 92
4.19 Regression Results for Provider Specific Investment ... 92
4.20 Regression Results of Moderating Effect of Provider Reputation ... 93
4.21 Regression Results of Moderating Effect of Satisfaction with Previous Outcomes ... 93
4.22 Regression Results of Moderating Effect of Communication... 194
4.23 Regression Results of Moderating Effect of Opportunistic Behavior ... 95
4.24 Correlation Matrix for Customer Respondents ... 97
4.25 Correlation Matrix for Provider Respondents... 98
LIST OF FIGURES
Figure Page
2.1 Lee (2001) Model ... 46
3.1 Proposed Model ... 51
3.2 Model of Moderator Effect... 52
4.1 Model of Hypothesized Relationships ... 91
5.1 Model of Hypotheses Tests... 103
C.1 Residual Plot for Information Sharing... 157
C.2 Residual Plot for Organizational Capability ... 157
C.3 Residual Plot for Provider Specific Investments... 158
C.4 Residual Plot for Provider Reputation ... 158
C.5 Residual Plot for Communication ... 159
C.6 Residual Plot for Opportunistic Behavior... 159
C.7 Residual Plot for Satisfaction with Previous Outcomes... 160
E.1 Customer v. Provider INFOEX Score... 166
E.2 Customer v. Provider ORGCAP Score... 166
xi
E.4 Customer v. Provider PR Score ... 167
E.5 Customer v. Provider COMM Score... 168
E.6 Customer v. Provider OB Score ... 168
1 CHAPTER 1 INTRODUCTION
Increased competitive pressures and stock price concerns are forcing firms to evaluate which activities should be performed in-house and which can be outsourced to increase productivity and return on shareholder value. Firms have opted to outsource activities such as payroll, accounting, customer service, and logistics. The contracting of logistics functions to an external supplier is referred to as third-party logistics (3PL). Organizational and relationship measures are often used to assess the success of a 3PL provider and customer relationship. Organizational measures may include a firm’s investment in people, technology, equipment, and processes. Relationship measures may include the ability of both parties to meet their counterpart’s needs. Consequently, firms are interested in identifying the factors that influence the success of its 3PL outcomes. Identifying the critical factors that influence the performance and relationship measures will assist firms to improve their performance with 3PLs.
2
This chapter will provide an overview of the dissertation. Section 1.1 describes the purpose of the research. The business climate that provides the background for this study is outlined in Section 1.2. The variables tested in the study are presented in Sections 1.3 through 1.5. The specific issues addressed in the research are outlined in Section 1.6. A summary of the chapter is provided in Section 1.7. Section 1.8 provides an outline of the research.
1.1 Purpose of research
This research examines the relationship between information sharing and outsourcing performance in a buyer-supplier relationship in the logistics industry. Information sharing is defined as the exchange of pertinent data that directly or indirectly influences the outcomes between suppliers and customers (Rhea and Shrock 2000). Outsourcing is defined as the substitution of external purchases for internal activities (Lieb and Randall, 1996).
Limited empirical research has appeared on the information sharing- outsourcing performance relationship, despite its apparent practical importance. For example, previous research has examined the relationship between
information exchange and logistics supplier performance (Stank et al 1996), as well as knowledge sharing and outsourcing success in the information
technology industry (Lee 2001). This research attempts to add to this body of literature by extending the Lee (2001) model to examine relationships between
3 customers and providers in 3PL relationships.
1.2 Problem statement
Approximately sixty percent of Fortune 500 companies report having at least one contract with a third-party logistics provider (Lieb and Bentz, 2004). Outsourcing has evolved through deregulation and controversy. Logistics outsourcing has grown considerably over several years, largely due to transport deregulation (Spencer, Rogers and Daugherty, 1994). The potential impact on employees when firms consider the use of outside contractors for logistics services is often debated. Maloni and Carter (2006) suggest that examining the effect on worker morale and productivity is a viable research stream for the future. In many instances, one of the motivating factors for considering such action is the desire to reduce headcount; nevertheless, the potential negative impact on company morale cannot be ignored (Lieb and Randall, 1996). This concern for employees must be balanced against a firm’s ability to compete in the market.
The global marketplace has placed a tremendous amount of pressure on companies to improve supply chain performance. Firms must improve
performance to remain cost competitive. Outsourcing has been viewed as a way for producers to reduce costs. Cost reductions due to outsourcing result from focusing on core activities and key differentiators; reducing and controlling
4
operating costs; releasing capacity and resources for core projects; gaining access to world-class capabilities; reducing time-to-market and cycle time;
sharing operational risk; and improving management of functions that are difficult to manage or functions that are out of control.
Manufacturers and service providers must often make the decision to outsource when internal capabilities are not cost efficient. One aspect of efforts to alleviate the pressure for reduced costs has been the outsourcing of support functions, such as logistics activities. Partnering with a 3PL is a viable approach to develop, collaborate on, and leverage the capabilities that lead to enhanced performance (Stank et al. 2003). The advantages and disadvantages of
outsourcing logistics have long been debated but hard, quantifiable evidence on third-party logistics developments is elusive (Peters et al. 1998). This research attempts to provide a quantitative measure of the factors that influence 3PL relationships outcomes. The factors are elaborated upon in the next sections.
5 1.3 Information Sharing
Information sharing has been shown to be one of the keys to successful supply chains (Whipple et al. 2002). There are various definitions of information sharing. Lee and Whang (2000) defined it as the transfer of information
regarding inventory levels and position, sales data and forecasts, order status, production and delivery schedules and capacity, and performance metrics. Sanders and Premus (2005) view information sharing as “providing firms with forward visibility, improved production planning, inventory management, and distribution” in their study of IT capabilities, collaboration, and firm performance.
Information sharing includes, but is not limited to, the transfer of
information in shipment tracing, billing transactions, and complaint resolutions (Rhea and Shrock 2000). Suppliers, manufacturers and customers acknowledge that the exchange of information among them results in a benefit greater than withholding information. For example, firms may experience excess inventory when they do not share product demand forecasts. However, when customers are willing to provide changing forecasts, manufacturers and suppliers can plan accordingly therefore minimizing the bullwhip effect (Lee and Kim, 1999).
Information sharing has been shown to have a positive relationship with supplier performance (Stank et al. 1996), and outsourcing success (Lee 2001). This represents a change of strategy from previous years when suppliers,
6
manufacturers and customers operated in their own silos and watched their supply chain partners experience the bullwhip effects. As early as 1991, Perry noted that one of the most important implications for logistics strategy in the coming decades is the growing importance of information in logistics system design and operations.
Today information is a resource that is not only becoming more productive than in the past but also relatively less expensive when compared to alternative resources (such as people, material, equipment, and facilities). To a great extent, innovations in the design and management of today's forward-looking logistics systems involve the more intensive use of information to achieve better control and visibility, resulting in lower logistics costs and better customer service (Perry 1991).
Research over the past decade supports the importance of information sharing in the supply chain. This includes research by: Stank et al. (1996); Stank and Lackey (1997); Maltz and Maltz (1998); Ellinger (2000); Lee (2001); Whipple et al. (2002); Sanders and Premus (2005); and Knemeyer and Murphy (2005). The literature addresses a number of relevant areas related to
information sharing and its direct effect on performance. However, several factors may influence the relationship, including firm structure, firm size, organizational capability, and relationship characteristics. Existing logistics research that examines the information sharing – outsourcing performance relationship, while considering those factors listed above, is limited.
7 1.4 Outsourcing Performance
This research focuses on examining the factors that influence outsourcing performance. The current study augments Stank et al. (1996), which surveyed export managers to find the significance between the flow of information and supplier performance. While the Stank et al. work focused on logistics service providers, the current study surveys both customers and providers firms of logistics services. In addition, the current study uses information sharing and organizational capability as predictors of outsourcing performance, similar to Lee (2001), who measured the influence of knowledge sharing on outsourcing
success and organizational capability as a moderator of that relationship. The current study will test information sharing, organizational capability and
relationship characteristics, independently, as predictors of outsourcing performance.
1.5 Relationship characteristics
More recently, relationship characteristics have also been noted to
influence logistics outsourcing arrangements. Stank et al. (1996) focused on firm characteristics as moderators of the relationship. Given the recent emphasis on supply chain management, it is important to examine relationship characteristics, an objective in the current study. The research presented here also builds on the Lee (2001) work that examined the knowledge sharing-outsourcing performance
8
relationship in the IT industry in Korea. The current study examines logistics outsourcing primarily in the U.S. It examines the relationship from both the buyer and supplier perspectives.
1.6 Research questions
There are three primary research questions that need to be addressed in order to study the central issue of information sharing and outsourcing success:
1. Is there a significant relationship between information sharing and outsourcing performance?
2. Is the relationship between information sharing and outsourcing performance moderated by organizational capabilities?
3. Is the relationship between information sharing and outsourcing performance moderated by relationship characteristics?
Some of the questions have been studied individually or in combination with other factors. This is believed to be one of the first attempts to include the three questions together using the scales for the various constructs that are used here.
1.7 Summary
This chapter has addressed the purpose of the research, which is to add to the outsourcing literature by examining factors that influence outsourcing performance. The research is important because of the urgency in the
9
marketplace to remain globally competitive by outsourcing activities that are not core operations or too costly to manage. Previous studies have identified some of the factors that influence outsourcing performance, including information sharing, organizational capability and relationship characteristics from the customer perspective. The current research builds on those studies by testing the variables on both customers and providers in logistics outsourcing
relationships. The results will help to address the research questions posed in Section 1.6.
This study may be helpful to firms that use logistics outsourcing services and to those firms considering the use of such services. Firms can enter
supplier-buyer relationships armed with the knowledge that organizational capabilities and relationship characteristics may influence outsourcing
relationships. This may help both suppliers and buyers take an internal look at what changes must be done to make the relationship work more effectively. This study is limited to firms that have a key relationship with an outsourcing provider or customer.
1.8 Outline of the dissertation
The remainder of this research is organized as follows: Chapter Two reviews existing research on outsourcing performance and information sharing. In addition, a review of firm capability and relationship characteristics is
10
presented. The chapter concludes with a summary of the research findings that are directly relevant to this research.
Hypotheses are developed for addressing the research questions in
Chapter Three, along with the means for testing them. This chapter identifies the different measurements used in the testing and the rationale for choosing
moderated multiple regression. This chapter also includes a description of the research design and procedure.
The data analysis and an evaluation of the results are presented in Chapter Four. The evidence for support of the specific hypotheses set forth in Chapter Three is examined for statistical significance and the statistical results and their managerial implications are interpreted.
Chapter Five summarizes the research findings with the emphasis on the theoretical and practical contributions made by the research findings. It also identifies limitations of the current study and avenues for future research.
11 CHAPTER 2 LITERATURE REVIEW
The outsourcing or make-or-buy decision has been discussed specifically in the general management literature for several decades (Maltz 1994).
However, limited empirical research exists that focuses specifically on the relationship between information sharing and outsourcing performance. This chapter begins by reviewing literature that is related to outsourcing performance. This is accomplished by: (1) defining outsourcing based on the existing literature; (2) exploring the rationale for why firms choose to outsource, and (3) examining how outsourcing performance has been measured. Next, selected information sharing literature is presented from an economic perspective and a supply chain perspective. The economics literature considers the constraints associated with information sharing, such as competition or demand uncertainty, while the supply chain literature addresses measures influenced by information sharing.
12 2.1 Outsourcing Defined
The external provision of logistics services is commonly known as third-party logistics (3PL). Third-third-party logistics has taken on many names in the logistics literature—outsourcing, contract logistics and offshoring to name a few. “Outsourcing, third-party logistics and contract logistics generally mean the same thing” (Lieb et al., 1992).
The term outsourcing was coined in the late 1980s for the subcontracting of information systems (Espino-Rodriguez and Padron-Robaina 2006).
Outsourcing has been identified with the function of information systems (Aubert et al. 2004; Lacity and Hirschheim 1993; Loh and Venkatraman 1992; Teng et al. 1995). However, in recent years the term is applied to a firm purchasing any activities that are not processed internally. The following literature points to the differences in outsourcing definitions.
La Londe and Cooper (1989) defined contract logistics as “a process whereby the shipper and third-party enter into an agreement for specific services at specific costs over some identifiable time horizon.” Murphy and Poist (2000) listed different definitions of 3PL’s. “It involves outsourcing logistics activities that have traditionally been performed in an organization; the functions
performed by the third-party can encompass the entire logistics process, or more commonly, selected activities within that process (Lieb and Randall, 1996); a 3PL
13
may be defined as an external supplier that performs all or part of a company’s logistics functions (Coyle et al., 2003); a 3PL may be defined as any firm providing a good or service that is not owned by the purchaser of the goods or service (Stank and Maltz, 1996).”
Murphy and Poist (2000) noted that several of the 3PL definitions suggest that third party logistics involves the provision of multiple distribution activities, but they often do not incorporate the concept of longer term, mutually-beneficial relationships between the parties. Their work argues for a more relational view of the 3PL definitions. This supports the current research to examine the
relationship aspects of both customer and provider perspectives.
Gilley and Rasheed (2000) noted that defining outsourcing simply in terms of procurement activities does not capture the true strategic nature of the issue. They suggested that outsourcing represents the fundamental decision to reject the internalization of an activity. They further proposed that outsourcing may arise in two ways. First, outsourcing can occur through the substitution of
external purchases for internal activities (discontinuation of internal production). American car manufacturers, for example, are choosing to assemble vehicles in third world countries instead of the U.S. The low labor rates in such countries, compared to the domestic union rates, are often cited as a common reason to outsource. Second, it can occur through abstention. For example, the founder of
14
Dell Inc., Michael Dell, chose to outsource the manufacturing activities from the inception of his business. First, this was probably due to lack of financial
resources. However, when the internalization of goods or services outsourced was within Dell Computer’s managerial and/or financial capabilities, the firm still chose not to manufacture its products internally.
Espino-Rodriguez and Padron-Robaina (2006) defined outsourcing as “a strategic decision that entails the external contracting of determined non-strategic activities or business processes necessary for the manufacture of goods or the provision of services by means of agreements or contracts with higher capability firms to undertake those activities or business processes, with the aim of
improving competitive advantage.” They classified outsourcing definitions into three types: (1) those that consider that outsourcing entails a stable, long-term collaboration agreement in which the supplier becomes a strategic partner and where there are exchange relations with independent firms (c.f., Mol et al. 2005; Quelin and Duhamel 2003; Sacristan 1999); (2) those definitions that indicate the type of activity or service that can be outsourced, i.e. activities and services that are non-strategic for the firm (c.f., Casani et al. 1996; Lei and Hitt 1995; Quinn and Hilmer 1994); and (3) those definitions that consider that outsourcing is an action that transfers planning, responsibility, knowledge and administration of activities, all through contracts (c.f., Blumberg 1998; Greaver 1999; McCarthy
15
and Anagnostou 2004; Rothery and Roberson 1996). See Table 2.1 for the specific definitions of these authors.
While many other terms and definitions of outsourcing exist, this research views outsourcing as using the services of an external supplier to perform some or all of a firm’s logistics functions (Coyle et al. 2003). Bradley (1994) argued that there is no difference between outsourcing logistical functions and any other procurement process. However, outsourcing and procurement differ; according to Gilley and Rasheed (2000); the former only occurs when the internalization of the good or service outsourced was within the acquiring firm’s managerial and/or functional capabilities. The reasons to outsource logistics activities are as vast as the definitions of the term.
16 continued Table 2.1 Different definitions of outsourcing a dapted
(Source: Espino-Rodriguez and
Padron-Robaina 2006, Table 1, p. 51)
Author(s) (Year)
Concepts of outsourcing
Harrigan (1985)
A variety of ‘make or buy’ decis
ions
’ to obtain the necessary supplies of
materials and services for the produc
tion of the organiz
ation’s goo
ds and
services.
Loh and Venkatraman (1992)
External vendors’ provision of phy
sica
l and/or
human resources associated wit
h
the user organization’s informati
on technology infrastructure.
Quinn and Hilmer (1994)
External acquisition of activities, incl
uding those traditionally cons
idered an
integral par
t of any firm, provided that t
hey do not form part
of the firm’s core
capabilities
.
Ventura (1995)
Exc
hange relations
hips with independent fi
rms with whom stable cooperation
agreements can be established.
Lei and Hitt (1995)
The act of trusting in external cap
abili
ties an
d skills for the manufacture of
determined production components and ot
her activities that have added value
(often capital intensiv
e).
17
Table 2.1 continued
Author(s) (Year)
Concepts of outsourcing
Rothery and Roberson (1996)
The act of turning to an external organiza
tion to perform a function previously
performed i
n-house. It entails the transfe
r of the planning, administration and
development of the activity
to an i
ndependent third party.
Casani
et al.
(1996)
Long-term l
ink related to the development of
determined activiti
es or tasks that
are not essential to the firm by specializ
ed professionals, who, in time, become
strategic partners.
Blumberg (1998)
Process of making contracts
with a third party to handle
a part of the client
firm’s business.
Sacristán (1999)
Collaboration agreement betw
een different types of firms in which one firm i
s a
specialist in technology and makes a significant contribution to the other by providing physical and/or human resources
during a certain period in order to
attain a determined objective.
Greaver (1999)
The act of an organiz
ation transferring perio
dic internal activities and
decision-taking to external suppliers through contracts.
Gilley and Rasheed (2000)
It is the substitution of activities
performed in-house by acquiring them
externally, although the firm has the nec
essary management and fi
nancial
capabilities
to develop them internally. It
is also an abstention from performing
activities in-house.
continued
18 Table 2.1 continued Author(s) (Year) Concepts of outsourcing Bailey et al. (2002) Handing ov er some or all of
that particular activity and related services to a
third party management, fo
r the required res
ult. Campos (2001) It consists of contracti ng an exter nal supplier to per
form a task previously
exec
uted by the organization itself, and ma
y also even involve ne
w activities.
Quélin and Duhamel (
2003)
The operation of shifting a transaction prev
iously governed internally to an
external supplier through a long-term contra
ct, and involving the transfer to the
vendor.
McCarthy and Anagnostou (2004)
Not only consists of purchasing products or
services from external sources, but
also transfers the responsibility for busi
ness
functions and often the associated
knowledge (tacit and codified) to
the external organization.
Mol et al. (2005)
The procur
ement of supplies from legally
independent entities (suppliers).
19 2.2 Reasons to Outsource
The decision to outsource logistics functions such as transportation, warehousing, and order processing is a variation on the traditional make-or-buy decision (Maltz and Ellram 1997). Outsourcing is motivated by the promise of strategic, economic, and technological benefits (Lee and Kim 1999). Strategic benefits refer to the ability of a firm to focus on its core business by outsourcing routine activities. Economic benefits refer to the ability of a firm to use human and technological resources of the service provider and to manage its cost structure through unambiguous contractual arrangements. Technological benefits refer to the ability of a firm to gain access to leading-edge IT and to avoid the risk of technological obsolescence that results from dynamic changes in IT (Grover et al. 1996).
Numerous studies have explored the reasons that firms decide to outsource (Table 2.2). These include improved productivity measurements (Muller 1992); financial issues, such as increasingly cost-efficient foreign
competition (Muller 1992); organizational structure issues, such as mergers and acquisitions (Muller 1992), company restructuring (Byrne 1993), centralized distribution systems (Bence 1995); and changes in management (Maltz 1995); and market issues, such as assessing present and future markets for products (Byrne 1993) and expanding into unfamiliar markets (Bence 1995).
20
to achieve scale economies, a reduction in capital risk levels, and the need for creative management as basic justification for the acquisition of external logistics services. Sheffi (1999) identified the major contributing factors to the
development of logistics outsourcing as pressures from increased competition, higher service level expectations, worldwide deregulation, and advances in computers and communication technology.
Baldwing et al. (2001) noted four categories of reasons that firms choose to outsource: strategic and organizational; policy; technical; and economics. Strategic and organizational reasons included eliminating a troublesome function, handling fluctuating demands, and exploiting new technologies. Policy reasons included government legislation and credibility enhancement. Perceived poor performance of internal staff was the argument for technical reasons. Lastly, their economic arguments included: generating a cash flow, savings costs, and freeing resources for core activities were consistent with previous literature.
The drivers of outsourcing (Table 2.2), however, must be balanced against risks. Lieb and Randall (1996) suggested that the most serious concerns to shippers in the use of third-party providers include the potential for the loss of direct control over logistics activities, uncertainties about the service level to be provided and questions concerning the true cost of outsourcing. The advantages and disadvantages of outsourcing logistics have been debated but quantifiable evidence on 3PL developments is elusive (Peters, Lieb and Randall 1998).
21
Drivers of outsourcing Identified by Improved productivity measurements
Increase in cost-efficient foreign competition Management demand for a financial
contribution from all sectors of the company Mergers and acquisitions that require keeping assets off the books
Need to move inventory faster Need for flexible production
Retrenchment to core business Muller (1992)
A company’s need to assess present and future market prospects for its product
Company restructuring
Development of supply chain partnerships Increasing customer demands
Increasing environmental awareness To determine the products’ competitive
advantage in the marketplace Byrne (1993)
Change in management
Existing facilities and/or systems Expanding into unfamiliar markets
Taking on new product lines Maltz (1995)
The success of firms using contract logistics Bradley (1994) The focus on temporal aspects of logistics
management Cooke (1994)
Trend towards centralized distribution systems Bence (1995) Table 2.2 Reasons for Outsourcing
(Source: Razzaque and Sheng 1998, Table II, p. 92)
Table 2.3 presents recent literature on third-party logistics developments. In a conceptual work, Quinn and Hilmer (1994) saw the suitability of developing internally the activities that comprise the core activities, and in every case advise that the firm’s outsourcing be undertaken in a framework of strategic alliances
22
with the aim of reducing the vulnerability of the organization. Teng et al., (1995) concluded that the discrepancies in the perceptions of the outcomes (i.e. cost, the quality of the activity and financial performance) are positively related to the propensity to outsource.
Murray et al. (1995) noted that “situational variables may have an impact on the appropriateness of a particular sourcing strategy and the corresponding level of market performance.” To develop a more realistic understanding of the contingency relationship between sourcing strategy and market performance, they examined the effect of environmental factors on the strategy-performance relationship. Their results identified a negative relationship between outsourcing and organizational performance as the asset specificity and innovations in
products and processes increase. However, there is no negative relationship between outsourcing and organizational performance when the bargaining power of suppliers increases. Nor was there a negative relationship between
outsourcing and financial performance as product and process innovations increase.
Argyres (1996) showed that organizations tend to outsource when the suppliers have superior capability, and the organization does not accept the short-term cost of in-house development with the aim of developing the
23
necessary capabilities internally. Poppo and Zenger (1998) supported a negative relationship between the specificity of resources and activity performance when the business process is outsourced.
McIvor (2000) proposed a theoretical framework that integrates the elements of the value chain, the concept of core competences and the selection of suppliers, which are key aspects that should guide the outsourcing decision. The work of Gilley and Rasheed (2000) focused on the analysis of the impact of outsourcing on organizational performance using the competitive strategy as a moderating variable, and concluded that the impact is positive in the case of a cost leadership strategy and negative in that of a differentiation strategy. Furthermore, the authors classify outsourcing into core outsourcing and
peripheral outsourcing, depending on how important the manager considers the principal activities are for increased sales and profitability.
Leiblein and Miller (2003) concluded that specific assets and uncertain demand increase the dangers of exchange and so decrease the probability of outsourcing activities. Aubert et al. (2004) showed that the technical skills necessary to develop an activity are more decisive than business skills at the time of deciding to outsource.
The next section addresses the literature that explores how outsourcing (performance) is measured.
24
Author(s) (Year) Variables under consideration
Ty
pe of study
Key
findings
Quinn and Hilmer (1994)
Level of outsourcing, depending on:
•
Core
competencies
•
Degree of strategic vulnerab
ilit
y
Conceptual paper
•
Perform in-house the activities comprising the set of core competences (e.g. Apple and Nike have reduced investment and strengthened their core capabilities).
•
Howev
er, those activities may also be
outsourced (e.g. Nike uses suppliers to manufacture some of the more specialized technical c
omponents
) provided that
strategic vulnerability is reduced by means of temporary consortia or long-term contracts.
Continued
Table 2.3: Summary of research re
lated to outsourci ng from the RBV (Source: Espino-Rodriguez and Padron-Robaina, 2006, Table 3, pp. 57-59) 24
25
Table 2.3 Continued
Author(s) (Year) Variables under consideration
Ty pe of study Key findings Murray et a l. (1995)
Relationship between outsourcing and organizational performance, depending on:
specificity of resource frequency
of transaction supplier's bargaining power
product and process innovations Empirical research
As resource specificit
y increases, the in-house
exec
ution of activities
produces better market
and financial performance than when they are outsourced.
An increas
ed frequen
cy of transactions does
not improve the outcom
e of the in-house
activity in comparison to when it is outsourced.
There is no negative relations
hip between
outsourcing and financial performance as the bargaining power of suppliers inc
reases.
There is a negative re
lationship between
outsourcing and financial performance as product and process innovations increase.
Continued
26
Table 2.3 continued
Author(s) (Year) Variables under consideration
Ty
pe of study
Key
findings
Teng et al. (1995) Level of outsourcing depending on:
discrepanc y in outcomes
comparison between the present and desired lev
els of
measurements of performance (quality, service, costs, etc.)
strategic ro le Empirical research
The discrepancies in the perception of the outcome in terms of qu
ality of information and
support for information systems decision-taking are positively related with the propensity to outsource.
The considerations regarding co
st are not so
important in the propensity to outsource as the difficulties associated
with obtaining quality
information outputs and the provision of a good service. As the performance of the resources starts to slip in an en
vironment characterized by
increased expectations and technological complex
ity, the decision to outsource becomes
a necessary strategic response.
The strategic role of IT
most asso
ciated with
outsourcing decisions
is the traditional rather
than integral role.
Continu
ed
27
Table 2.3 continued Author(s) (Year)
Variables under consideration
Ty
pe of study
Key
findings
Argyres (1996) Level of outsourcing depending on:
firm's
capabilities
suppliers' capabilities knowledge Empirical research
At times it is decided to perform an activity in-house because of high transaction costs or because the firm opts to develop long-term firm capabilities. Sometimes, even when the transaction costs are high, it is decided to outsource because the suppliers have superior capabilities. When the knowledge related to the activity is partly tacit and based on teamwork, it i
s decided to outsource
since it requires time to acquire that knowledge.
Poppo and Zenger (1998)
Relationship between outsourcing and performance, depending on:
specificity of resource difficulty of measurement magnitude of skill set economies of scale Empirical research
The greater the difficulty to
measure the outcome of an
activity is, the more dissatisfied the manage
rs will be
with the cost, quality and respons
iveness of the
activities performed in-house.
Increases in the skill set had no effect on internal performance, but incre
ases in skill set size had a
signific
ant positive effect on managers' perceptions of
cost, quality and responsiveness
performance for outsourced exchan ges . Activities requirin g a skill set
are more likely to be outsourced.
Firms whose internal scale is sufficient to have economies of scale are more likely to develop services in-house.
Continued
28
Table 2.3 continued
Author(s) (Year) Variables under consideration
Ty
pe of study
Key
findings
McIvor (2000) continued Theoretical framework includes:
value
chain
core and non-core activities internal
versus
external capabilities
practices
of
outsourcing and management of suppliers
Conceptual paper
The propos
ed outsourcing framework
integrates the key elements of the value chain, the thinking about core acti
vities
and the supply base that influenc
e the
decision-taking proces
s.
There is a need for empirical wo
rks to
define the core and non-core activities of the busines
s and their relationship with
corporate strategy.
Crucial strategic information is also obtained by means of a comparison of the outcomes of the internal and external capabilities
for a determined activity by
benchmarking.
The relationship between outsourcing practices and the management of suppliers has become essential in western firms that use outsourcing through alliances to reduce the risks associated with outsourcing.
Continu
ed
29
Table 2.3 continued
Author(s) (Year) Variables under consideration
Ty
pe of study
Key
findings
Gilley and Rashee
d
(2000)
Relationship between outsourcing and performance, depending on: organization’s strategy environmental dynamism
Empirical research
Outsourcing is positively related to firm performance for organizations that follow a cost leadership strategy and ne
gatively
for organizations that follow a differentiation strategy
.
The effect of outsourcing on firm performance varies with the different levels of environmental dynamism. In a very stable environment, stakeholder performance is positiv
ely related to peripheral outsourcing. Continu ed 29
30
Table 2.3 continued
Author(s) (Year) Variables under consideration
Ty pe of study K ey findings Klass et al. (2001)
Level of outsourcing depending on:
idiosy
ncrasy of HR
strategic role of HR pay lead strategy promotion opportunities
Relationship between outsourcing and performance, depending on:
general and routine activities Empirical research
In organizations using idiosy
ncratic or unique
approaches to managing human resources, the levels of outsourcing for generalist and human capital activities is low, but not for routine and transactional activities.
Organizations that emphasize the strategic role of HR trust more in the outsourcing of human capital activities, and personnel recruitment and selection activities. Organizations that use a 'pay lead strategy' outsource activities lik
e training a
nd selectio
n
to specialists to
a greater ex
tent, but that is
not the case for r
outine administrative
activities.
The organizations that place greater emphasis on promotion opportunities are those that make less use of outsourcing for human capital activities and personnel recruitment and selection activities. There are negative relationships between HR performance and the outsourcing of human capital activities and personnel recruitment and selection activities. The level of outsourcing of transactional and routine activities is not lower in organizations that have obtained positiv
e outcomes.
Continued
31
Table 2.3 continued
Author(s) (Year) Variables under consideration
Ty pe of study K ey findings Leib lein an d Miller (2003)
Level of outsourcing depending on:
specificity uncertainty experience
in manufacturing experience in outsourcing product-market diversification Empirical research
Specific resources and demand uncertainty increase exchange hazards and therefore reduce the likelihood of outsourcing activities. In line with the qualitat
ive arguments of Argyres
(1996), org
anizations with greater experienc
e
with a determined technolo
gy of a process are
more likely to internaliz
e manufacturing
activities than organiz
ations lacking such
production exp
erience.
Organizations with hig
h levels of outsourcing
experience are more likel
y to outsource their
production than organizations wit
hout that
experience.
The measure of the co
rporate strategy and of
product-market diversification is associated with a lowe
r probabilit
y of outsourcing.
Continu
ed
32
Table 2.3 continued
Author(s) (Year) Variables under consideration
Ty pe of study K ey findings Aubert et al. (2004) Level of outsourcing depending on:
specificity uncertainty technical
sk ills business sk ills Empirical research
Contrary to what was predicted, there is a positive relationship between specific resources and the level of outsourcing. Organizations more easily
outsource activities
when the uncertainty level is low; in other words, when the activities are less complex and easier to measure, the level of outsourcing is higher.
The more important the technical skills ne
ed
ed
to perfor
m
ance of the activities are, the mo
re
external suppliers ar
e entrusted with the
activities.
Business s
kills do not appear to play an
important role in the outsourcing decision.
33 2.3 Measuring Outsourcing Performance
One of the challenges in trying to evaluate the growing body of empirical studies is that researchers often employ different terms and definitions of third-party logistics (Skjoett-Larson 2000). Another challenge is the methods used to measure outsourcing performance. The literature explores how outsourcing has been measured from both the customer and the provider perspectives.
Boyson et al. (1999) examined effective management of third-party logistics providers across many industries in the U.S. Their survey revealed three findings: (1) that the success of outsourcing agreements depends heavily upon the management skills of the firms engaging the services of third-party logistics providers; (2) profit growth and the evolution of stronger core
competencies were the most important drivers behind the outsourcing of logistics functions; and (3) firms rated financial stability as more important than any other 3PL provider characteristic.
Lee and Kim (1999) studied partnerships in successful information systems outsourcing relationships from the customer perspective. The results showed that partnership quality was a key predictor of outsourcing success. Partnership quality was positively influenced by: participation, communication, information sharing, top management support, and negatively influenced by the age of the relationship and mutual dependency.
34
strategy and performance within a manufacturer-3PL context, noted that organizational capabilities may impact performance as well as mediate the strategy-performance relationship. A mediating variable is the generative
mechanism through which the focal independent variable (in this case, strategy) is able to influence the dependent variable (performance) of interest (Holmbeck, 1997); the independent variable influences the mediator which then influences the outcomes. Capabilities in this context were defined in terms of operational flexibility and level of collaboration. Operational flexibility referred to the ability of both partners to make adjustments in the relationship to cope with the changing environment and developing processes to increase flexibility to respond to customer requests. Operational flexibility was directly related to logistics performance but level of collaboration was not. Operational flexibility also
mediated the relationship between the competitor orientation part of strategy and logistics performance. Increasing attention has been paid to building a
successful relationship between the customer and the provider of outsourcing services (Lee 2001).
Knemeyer and Murphy’s (2005) study of 3PL’s examined whether the 3PL relationship outcomes are influenced by select relationship characteristics and/or select customer attributes. The survey respondents consisted of logistics
professionals in arrangements with third-party providers of logistics services. The five constructs used to measure relationship characteristics included:
35
(1) provider’s specific investments; (2) provider’s reputation; (3) satisfaction with previous outcomes; (4) communication with the provider; and (5) opportunistic behavior by the provider. Outcome measures constructs were retention,
referrals, service recovery, and operational performance improvements. These were developed from a relationship marketing context. Their findings suggested that relationship characteristics have a profound influence on outsourcing
outcomes. Specifically, satisfaction with the previous outcomes, communication with the provider, and length of relationship were significantly related to retention and referrals. Communication with the provider and provider-specific investment were significantly related to service recovery. Satisfaction with the previous outcomes, communication with the provider, and the number of functions
outsourced were statistically significant to operation performance improvements. In summary, the literature suggests a variety of definitions for outsourcing, reasons for outsourcing and ways to measure outsourcing performance. The current research investigates how the information sharing-outsourcing
performance relationship is moderated by relationship characteristics
2.4 Information Sharing
In general, information is required to help logistics management make a variety of decisions ranging from choice of carriers to desired inventory levels to the appropriate number of warehouses (Deeter-Schmelz 1997). Information sharing includes, but is not limited to, the transfer of information in shipment
36
tracing, billing transactions, and complaint resolutions (Rhea and Shrock 2000). Information systems play an integral role in information sharing. “As a support mechanism, the information system is critical in facilitating effective and efficient interactions between the logistics team and potential sources of information” (Deeter-Schmelz 1997). However, previous research shows that the information exchange, not the technology used to exchange the data, is most important (Mackay and Rosier 1996; Williams et al. 1998; Clinton and Closs 1997; Germain and Droge 1995; Droge et al. 1991; Forza 1996; Semeijn 1995; Stank and Crum 1997). Therefore, the following literature review will focus on information sharing, not the systems used to facilitate it. The information sharing literature is
presented in the next section.
2.5 Information Sharing in Supply Chains
The original use of the term supply chain management emphasized a reduction in inventory both within and across firms but that initial perspective has been broadening to include multiple processes across firms (Cooper et al., 1997). While the amount of information sharing has increased, it appears that more is needed to achieve integrated supply chains. Manufacturers that build strong relationships with their suppliers and customers should be more
competitive than those manufacturers that elect not to do the same. There is growing literature on how information sharing benefits organizations and supply chains. Intra-organizational information sharing
37
research focused on sharing information previously generated, analyzed, and stored by many throughout the organization (Bardi et al. 1994). Research has also focused on documented interactions between interdependent departments (Ellinger et al. 2000), including marketing and logistics functions (Mollenkopf et al. 2000). Each study supported the benefits associated with sharing information within an organization. More recently, the literature has focused on examining information sharing in the supply chain.
The literature can be classified into two categories: analytical and
empirical. The analytical literature review provides a background on how factors such as inventory processes; competition; and demand collaboration can
influence the outcomes of information sharing. The empirical literature review will form the background for how information sharing influences performance, the focus of the current study. First, the analytical literature is examined.
Bourland et al. (1996) examined the case when the manufacturer had a different review period than the retailer and the information of inventory level at the retailer at the time of its order review can help the manufacturer to make a better order replenishment decision. Gavirneni et al. (1999) considered the case when the manufacturer has limited capacity. In addition, they considered two cases of the information sharing between the supplier and the customer, and compared the costs to evaluate the benefit of obtaining additional information about the customer’s inventory level.
38
Cachon and Fisher (2000) showed how the manufacturers benefited from using information from the upstream members of a supply chain. The benefits included better inventory allocation and lower inventory cost. Lee et al. (2000) studied the value of sharing demand information in a supply chain with one customer and one supplier. Results showed that the savings from
information sharing can be significant.
The selected analytical research showed that competition hurts the supply chain performance in terms of expecting suppliers to absorb costs instead of sharing in the risks and benefits (Cachon and Lariviere 2001). Researchers later proposed coordination mechanisms that pull the supply chain performance closer to the overall optimum (Corbett et al. 2004). They examined the value to a
supplier of obtaining better information about a buyer’s cost structure and the interaction between the type of contract and the supplier’s knowledge about the buyer’s cost structure.
Other research examines vertical information sharing in the presence of horizontal competition in supply chains, where the information is shared vertically between customers and the supplier and the competition is horizontal among customers. This line of research examines the effect of information sharing on the competition in the downstream market. Vertical information sharing has two effects, the “direct effect” on the payoffs of the parties involved in the information sharing arrangement, and the “indirect effect” on the competing parties (Li 2002).
39
Xu and Dong (2004) studied demand collaboration in the supply chain. Their study found that demand collaboration is an effective coordination
mechanism for the supply chain in that it helps reveal the retailers’ true
information at the time of ordering. This analytical study and others provide a background to understand the factors that may influence information sharing in the supply chain. While these factors are not considered in the current study, it is important to understand their role. The following four studies explore the
influence of information sharing on performance.
Stank et al. (1996) examined the exchange of meaningful and timely information with international logistics providers. (See Table 2.4) The
information exchange construct included information from the customers to help the provider plan for their needs, to help the provider stay informed of distribution plans, long range forecasts of distribution plans, and be informed in advance of impending changes. The performance construct included perceptions regarding the success of the relationship. Several firm characteristics were examined as possible moderators of the relationship between information exchange and performance. These included channel position, firm size, and organizational structure. The latter was measured as centralized, divisional, combination or other. Respondents were export managers of U.S. manufacturing firms.
40
moderator variables indicated a significant effect on the exchange-performance relationship using multiple moderated regression.
Stank and Lackey (1997) examined exchanging information with supply chain members in Mexican maquiladora operations pertaining to business plans and best practices. Logistics capabilities included positioning, agility, integration, and measurement. The information sharing construct related to kanban; new product development; future requirements; reducing purchase order releases; and top management contact with customer, supplier, and employees.
Information sharing was part of the integration capability. Eight performance measures related to lead time, on-time deliveries, inbound and outbound shipments, routing and scheduling, and effective strategy for border crossing delays. Responses were divided into high and low levels of information sharing and the differences in mean responses on each performance variable were tested. All differences were significantly related to the information sharing construct except routing and scheduling being improved by consolidating outbound shipments at an alpha level of 0.10.
41
Author(s) (Year) Variables under consideration
Ty
pe of study
Key
findings
Stank, Emmelhainz, and Daugherty (1996)
•
Firm characteristics • Firm
struc ture • Supplier performance Empirical • Information exchan ge directly related to perceived s upplier performance •
Firm characteristics and structure did not moderate the exchange-performance relati
onshi
p
Stank and Lackey (1997)
•
Information Integration • Performance
Empirical
•
Six of the eight performance measures- lead time, on-time deliveries, inbound and outbound s
hipments, and effective
strategies for border crossing delays at Mexican maquiladoras are significantly related to integration capability, which includes inf
ormation sharing
Maltz and Maltz (1998)
•
Information Sharing • Customer
Service • Respons iv eness Empirical • Information sharing ha s a signific ant
relationship with responsiveness, and is negatively related to percentage of late deliv
eries and percentage of backlogged
orders.
Table 2.4: Selected information shar
ing in s
upply chains literature
continued
42
Table 2.4 continued
Author(s) (y
ear)
Variables under consideration
Ty pe of stud y Key findings Gavirneni et al. (1999) • Information flow • Capac ity • Inventory Analytical • Information
sharing results in lower costs,
in particular at higher capacities,
•
Information is used to schedule production and invent
ory more efficiently only if the
system has the flexibility to
respond to the information Bourland et al. (1999) • Timely information sharing • Inventories • Service lev els Analytical • Exc
hange of timely demand information is
particularly sensitive to demand variability, the service level provid
ed by the supplier,
and the synchronizing of ordering and production cycles
Cachon and Fisher (2000)
• Sharing demand and invent ory information Analytical • Information
technology is more val
uable
than information sharing to accelerate and smooth the physical flow of goods.
•
Information sharing is valued sign
ificantly
greater for environments with unknown demand by
improving the supplie
r’s ability
to detect s
hifts in the demand process
continued
43
Table 2.4 continued
Author(s) (y
ear)
Variables under consideration
Ty pe of stud y Key findings Lee et al. (2000) • Shared information • Order quantity decisions Analytical •
Information sharing lowered supply chain costs by about 23% in high demand nonstationary scenario
Rhea and Shrock (2000)
Information flow Determinants and dimensio ns of customer satisfaction Conceptual Operational def
inition of physical distribution
effectiveness: “the extent to which product flows and distribution-related infor
m
ation flows
satisfy customers.”
The effectiveness determinants for informati
on
sharing inc
lude order procedures/entry;
invoic
ing/billing; customer service policy;
inquiries; claims; retur
ns; alteration;
replacement; emergency service; and promotion support
Determinants must be identified so that customer satisfaction is achieved.
Lee (2001)
Knowledge
sharing
Organizational capability Partnership
quality Outsourcing success Empirical
Knowledge sharing, measured in terms of implic
it and tacit knowledge, direc
tly influenc
es
outsourcing success
Organizational capability moderates the knowledge sharing-out
sourcing success
relationsh
ip
Partnership quality mediates the knowledge sharing-out
sourcing success relationship
continued
44
Table 2.4 continued
Author(s) (y
ear)
Variables under consideration
Ty
pe of study
Key
findings
Whipple, Frankel and Daugherty (2002)
Information accuracy Information timeliness Performance
Empirical
An increas
e in the amount of operational
information exchanged had a significant, positive im
pact on alliance satisfaction, for
both buyers and suppliers.
Buyers reported that the accuracy of the information exchanged represented an additional c
ritical factor impacting satisfaction.
Suppliers prefer timely information.
Angulo, Nachtmann, and Waller (2004)
Information accuracy Information timeliness Replenishment decisions
Empirical
Sharing forecasts should be emphasized on items with nonstationary demand rates such as new items, items fa
cing new competitors,
seasonal items, and it
ems that are often
promoted.
Supp
liers value information accuracy, while
retailers value information timeliness.
Corbett, Zh
ou and
Tang (2004)
•
Information asymmetry • Profits
Analytical
The value of full information to the supplier increases with the uncertainty about the buyer’s costs and with the price sensitivity of demand.
Xu and Dong (2004)
Information gaming
Analytical
The manufacturer in a collaboration relationship has the most to gain. The benefit
s to the manu
facturer are sensitive
to the nature of demand information and retailer claim behavior.
