• Journal of the Korea Society for Simulation
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• v.31 no.1
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• pp.19-27
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• 2022

This study compares and analyzes wholesale(or price-only) contract, revenue-sharing contract, quantity-flexibility contract, and channel-rebate contract in a decentralized supply chain consisting of one supplier and one retailer. By setting the parameters of each coordination contract based on the previous results, we conduct simulations using @RISK for several combinations of these parameters. Under the supply chain coordination, we evaluate the probability of successfully signing a contract and the participant in favor of each contract. As a result, the quantity-flexibility contracts is most advantageous for the retailer and the channel-rebate contracts is most advantageous for the supplier. It revealed that revenue-sharing contracts can be used more flexibly because they can be selected in the widest range to redistribute profits between supplier and retailer.

• Journal of Distribution Science
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• v.13 no.11
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• pp.47-58
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• 2015

Purpose - This study aims to seek determinants of department store sales commission rates under consignment contracts based on transaction cost theory, the power-dependence view, and the resource-based view. A consignment contract is a unique contract where the retailer, over a given period, takes possession of goods owned by a supplier, promotes the sales of these goods, and receives a profit share from their sales. Under this contract, the supplier owns the goods until they are sold. In department stores in South Korea, over 70% of overall sales comes through consignment contracts. In other words, this is the most popular contract agreement between large retailers and vendors in South Korea. Consignment contracts yield high profits to department stores with minimal sales uncertainty, stock cost, and marketing investment. Many suppliers believe the consignment contract commission rates are too high. However, department stores disagree. They state that the commissions are not high as they generate new value for the suppliers by accumulating up-to-date merchandise and supporting various marketing programs on their behalf. Recently, consignment contracts have been critically examined and scrutinized by politicians, mass media, and the public of Korea. This study further intends to derive implications reflecting both buyer and seller perspectives as well as offer insights to policy makers in making appropriate decisions. Research design, data, and methodology - To verify the proposed research model and test hypotheses, the authors selected 164 suppliers, which currently have relationships with department stores. This study carefully investigated the reliability, content validity, convergent validity, and discriminant validity of the proposed model. The data were analyzed using SPSS 18.0 and AMOS structural equation modeling program Results - For the transaction cost theory and the power-dependence view, the results indicated that product diversity and demand volatility had a positive impact on the sales dependence on a department store. Dependence in turn had a positive effect on the sales commission under the consignment contract. Based on the resource-based view, the department store's marketing capability, the supplier's perception toward merchandising, and supporting activities could enhance the department store's channel leadership in the buyer-seller relationship. Subsequently, the channel leadership had a positive effect on the sales commission. However, product complexity had no relationship with department store dependence. Conclusions - This is the first empirical research that investigates the determinants of sales commissions under consignment contracts in the domestic retail industry. This study reveals several theoretical and practical implications for both marketing scholars and marketers. In terms of theoretical implication, this study integrated and enlarged certain theoretical background, such as transaction cost theory, the power-dependence view, and the resource-based view, to explain the determinants of sales commissions under consignment contracts that include sales revenue. From a business management viewpoint, this research offers useful insights for policy makers by applying two different perspectives, both the manufacturer and the retailer, in terms of the sales commission issue under a consignment contract.

• The Transactions of the Korean Institute of Electrical Engineers A
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• v.54 no.1
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• pp.38-42
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• 2005

Restructuring of the electric power industry has brought the issue of market competitiveness to surface. Recent years have witnessed the appearance of a particular seller or group of sellers exercising market power in electricity supply. In fact, much scholarly work has been done on how to identify and mitigate such abuse by market management rules. In this paper we assess the possible market power on the basis of pivotal supplier test and propose the method to determine the reasonable quantity of long-term contracts which can play a crucial role in mitigating the market power for a pivotal player. Furthermore the market efficiency is guaranteed by making long term contracts with a pivotal player up to the quantity to ensure that the pivotal player has no incentive to abuse the pivotal quantity in the electricity market.

• Industrial Engineering and Management Systems
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• v.12 no.3
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• pp.224-233
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• 2013

In supply chain management, the supply contract can induce collaboration and coordination among the supply chain members in order to optimize supply chain performance. Numerous supply contracts have been examined; however, some difficulties related to the application of these contracts still occur. One of the solutions is to apply the composite supply contract which can assist in the supply chain coordination. This research examines the composite contract of the revenue sharing and quantity flexibility contracts in a two-stage supply chain, which comprises a retailer and a supplier. In this research, a mathematical model of the composite contract is developed; then, the applicability of the proposed composite contract is examined by investigating its capability in terms of supply chain coordination and profit allocation. In the numerical experiments, the composite revenue sharing-quantity flexibility contract showed that it is superior to both component contracts in terms of supply chain coordination and profit allocation among supply chain members.

• Journal of the Korean Operations Research and Management Science Society
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• v.41 no.2
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• pp.101-127
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• 2016

Irrational ordering decisions of supply chain members have been gaining growing importance in the area of supply chain management. Irrational ordering behaviors that deviate from the profit maximizing decisions in the newsvendor settings have observed with human experiments in recent research. These behaviors can be modeled with several typical decision bias elements. This bias in ordering decisions affects the performance of supply chain contracts designed based on the assumption that the supply chain members make optimal decisions, making it necessary to design supply chain contracts by considering the irrationality. The purpose of this research is to derive a method to design the revenue sharing contract that considers human irrationality in ordering decisions. This research considers a simple two-echelon supply chain consisting of one supplier and one retailer, where the supplier is assumed to be perfectly rational while the retailer making newsvendor type ordering decisions displays irrational ordering behaviors. Under this environment, this research analytically models the revenue sharing contract to maximize the total supply chain profit or the supplier's own profits while considering the three decision bias patterns of the retailer, which include the pull-to-center effect, the prospect theory, and the increased subjective sensitivity to the revenue sharing ratio. Irrationality parameters are measured through human experiments based on which and through numerical simulations, we showed that significant improvements in the supply chain performance can be achieved.

• Journal of the Korean Society of Food Science and Nutrition
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• v.41 no.6
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• pp.861-869
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• 2012

This study was conducted to investigate the purchasing status and to compare supplier performance evaluations between competitive bidding and negotiated contracts in school foodservice in Changwon, Korea. A total of 190 questionnaires were distributed and 167 (return rate 87.9%) were collected from June 29 to September 28, 2010, and then a total of 151 (analysis rate 79.5%) were used for the final analysis. First, 91.4% of food product purchases for school meals were contracted through competitive bidding, especially limited competitive bidding. It mainly consisted of agricultural products, processed food, and eco-friendly agricultural products (fruit). Second, 78.8% of schools purchased food products by negotiated contracts, while single negotiation accounted for 59.7%. Food products by negotiated contract consisted of meat, kimchi, and fish. Third, the purchase status of competitive bidding and negotiated contracts showed a significant difference in agricultural products (p<0.001), fish (p<0.001), meats (p<0.001), poultry (p<0.001), antibiotic-free poultry (p<0.001), eco-friendly grain (p<0.001), eco-friendly agricultural products (fruit) (p<0.001), eco-friendly processed food (p<0.001), processed products (p<0.001), milk (p<0.001) and general grain (p<0.001) except for kimchi. Fourth, comparative analysis of supplier performance evaluation (on a 5-point Likert scale) of school foodservice showed that price of product of competitive bidding (3.73) was significantly higher than that of negotiated contract (2.95) (p<0.001), and the overall performance level of the negotiated contract (3.85) was significantly higher than that of competitive bidding (3.61) (p<0.01). The supplier performance evaluation levels of product packaging (p<0.01), product quality at the time of delivery (p<0.001), hygiene of products (p<0.001), consistency to specification (p<0.001), swiftness of return and exchange (p<0.001), emergency delivery (p<0.001), service of delivery staff (p<0.05), and handling of complaints (p<0.001) of negotiated contracts were significantly higher than those of competitive bidding of school foodservice. In conclusion, school foodservice selected food suppliers both by adopting competitive bidding and negotiated contracts. And there was a significant difference of school foodservice supplier performance between competitive bidding and negotiated contracts in Changwon, Korea.

• The Korean Journal of Food And Nutrition
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• v.21 no.4
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• pp.562-571
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• 2008

The principal objective of this study was to assess dietitian's awareness and performance with regard to food suppliers' selection guidelines and purchase guidelines for the receipt of safe food materials. A questionnaire was administered to 203 dietitians working at an elementary school in Gyeonggi North province, and 190 responses were ultimately returned. Excluding responses with incomplete answers and significant missing data, 161 responses(79.3%) were ultimately utilized for data analysis. We determined that meat/poulty and seafood were purchased mainly by manufacturer's branch(59.8% and 78.3%), and processed food and kimchi were generally purchased by producer's cooperatives(47.7% and 44.9%). 78.3% of the contracts were made via informal purchasing and the frequency of contracts was less than 3 times per year(53.4%). Market studies were conducted individually(54.7%), and by group(47.2%). Dietitian and parents volunteered(50.3%) or dietitians, and school and foodservice staffs(45.3%) participated - together in receiving and inspection. School contracted with $4{\sim}5$(39.1%) and $6{\sim}8$ food suppliers(29.8%). Dietitians(42.3%) or school councils(40.2%) evaluated food suppliers once per semester(60.2%). The majority of dietitians(96.3%) conducted sanitary education for food suppliers once per semester (68.3%). All 13 guidelines which were usually used to evaluate food suppliers were thought to be important(more than 4) based on a 5 scale(1: never important, 5: very important). Among them, 'sanitary storage status of food products(4.85)', 'have a chill car(4.83)' and 'proper control of refrigerator, freezer and storage room(4.81)' were the most crucial guidelines. As dietitians evaluated food supplier's-observances of 13 guidelines, 'have a chill car(4.89)', 'hold medical examination of employees(4.89)' and 'hold liability insurance for handling product(4.80)' were fulfilled relatively well. The guidelines for conducting education for their employees(4.45) and keeping their establishment and equipment sanitary(4.79) were important, but were not observed well(3.39 and 3.37). Additionally, the difference between the importance and the observance score of the 'HACCP certificate' were fairly significant(4.44 and 3.54). Dietitians tended to report that purchasing management related to the removal of foodborne illness factors(4.71), return confirmation(4.50) and purchase specification(4.32) were important. The difference between importance and performance was highest in the process of changing food suppliers when the contracts were violated more than three times. Dietitian's age, education work experience and employment type had no observable effects on how important they considered purchase management to be, but their work experience significantly affected performance in terms of the removal of foodborne illness factors(p<0.05). As supplier management is the most critical factor, it is clearly desirable to educate suppliers at specialized training centers and to supervise suppliers in accordance with the established sanitary guidelines.

• Journal of the Korean Operations Research and Management Science Society
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• v.31 no.2
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• pp.129-140
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• 2006

Quantity Flexibility contract coordinates individually motivated supplier and buyer to the systemwide optimal outcome by effectively allocating the costs of market demand uncertainty. The main feature of the contract is to couple the buyer's commitment to purchase no less than a certain percentage below the forecast with the supplier's guarantee to deliver up to a certain percentage above. In this paper we refine the previous models by adding some realistic features including the upper and lower limits of the purchase. We also incorporate purchase and canceling costs in a cost function to reflect the real world contracting process more accurately. To obtain the solution of the model, we derive a condition for extreme points using the Leibniz's rule and construct an algorithm for finding the optimal solution of the model. Several examples illustrating the algorithm show that the approach is valid and efficient.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.15 no.12
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• pp.7025-7039
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• 2014

Focal companies (hereafter called buyers) adopt outsourcing practices from a supply chain management strategy to be competitive. Buyers face the bridge transfer after outsourcing contracts, and the monitoring practices would be the only control mechanism left to prevent losing control over the suppliers. This study suggests the set of monitoring practices (i.e., capability, activity and outcome monitoring) as the independent variables to enhance the buyer-supplier collaboration and supplier's performance. In addition the buyer's efforts of monitoring are assumed to influence the buyer's shop floor productivity mediated by the supplier's performance and buyer-supplier collaboration. The results showed that the monitoring practices are meaningful antecedents to the supplier's performance and buyer-supplier collaboration, which fully mediates between the monitoring practices and buyer's shop floor productivity. The mediating role of the buyer-supplier collaboration between activity monitoring and shop floor productive has been rejected, because the negative effect of activity monitoring on buyer-supplier collaboration conflicts with the positive impact of buyer-supplier collaboration on shop floor productive. The theoretical contribution and managerial implications with limitations have been discussed.

• Journal of Distribution Research
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• v.13 no.4
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• pp.71-95
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• 2008

Transaction between industrial suppliers and their buyers in business markets increasingly take place in the form of long-tenn business relationships. These relationships are governed through formal or informal agreements. Dynamic business markets are also forcing B2B marketers to create flexibility in their firms. However, buyers are bound in their rationality and find it impossible to contemplate all possible future contingencies. The more formal and detailed the contracts they conclude, the likelier it becomes that at least one buyer is going to perceive a need to adjust the initial agreement as environmental events unfold. In this case, the actor relies upon industrial supplier's competence. Our study purpose is to examine the consequences of supplier's competence on the industrial customer-supplier long-tenn relationship. Antecedent variables of supplier competence include R&D, flexibility, brand asset, market sensing, and customer support service. We presented a comprehensive constructive model consisting of components of supplier's competence and the antecedent factors. Research hypotheses were developed and data were gathered from respondents who work in the cosmetics industry. The results discussed here represent a first step towards a better understanding of the role of supplier competence in the B-to-B cosmetics industry. Managerial implications and the limitations of this research were also discussed.