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http://ssrn.com/abstract=2178157
 
 

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Contracting for On-Time Delivery in the U.S. Influenza Vaccine Supply Chain


Tinglong Dai


Johns Hopkins University - Carey Business School

Soo-Haeng Cho


Carnegie Mellon University - Tepper School of Business

Fuqiang Zhang


Washington University in Saint Louis - John M. Olin Business School

November 14, 2012


Abstract:     
Motivated by the influenza vaccine industry, we study a supply chain contracting problem under the presence of uncertainties that are related to product design, delivery, and demand, respectively. The supply chain consists of a manufacturer and a retailer, where the retailer places an order before the flu season starts and the manufacturer decides on when to produce the products. Because production after the design freeze can result in late deliveries and hence lost sales, the manufacturer may initiate production prior to the design freeze at its own risk. We show that a negative feedback loop in the firms' incentives may arise in this supply chain; as a result, some of the traditional coordinating contracts (e.g., revenue sharing) could perform even worse than a wholesale price contract. To break the negative feedback loop, we introduce two coordinating contracts: Delivery-time-dependent Quantity Flexibility (D-QF) contract that relates return quantity to delivery schedule, and Buyback-and-Late-Rebate (BLR) contract that combines buyback with rebate for late deliveries. In view of the complexity of the coordinating contracts, we also analyze two simpler formats, Quantity Flexibility (QF) and Late-Rebate (LR). We find that the QF contract performs well when profit margin is either very high or very low, while the LR contract performs well when the retailer has a dominant bargaining power.

Number of Pages in PDF File: 33

Keywords: influenza vaccine, supply contract, on-time delivery, coordination

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Date posted: November 20, 2012  

Suggested Citation

Dai, Tinglong and Cho, Soo-Haeng and Zhang, Fuqiang, Contracting for On-Time Delivery in the U.S. Influenza Vaccine Supply Chain (November 14, 2012). Available at SSRN: http://ssrn.com/abstract=2178157 or http://dx.doi.org/10.2139/ssrn.2178157

Contact Information

Tinglong Dai
Johns Hopkins University - Carey Business School ( email )
100 International Drive
Baltimore, MD 21202-1099
United States
Soo-Haeng Cho (Contact Author)
Carnegie Mellon University - Tepper School of Business ( email )
Pittsburgh, PA 15213-3890
United States
HOME PAGE: http://public.tepper.cmu.edu/facultydirectory/FacultyDirectoryProfile.aspx?id=290
Fuqiang Zhang
Washington University in Saint Louis - John M. Olin Business School ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
HOME PAGE: http://www.olin.wustl.edu/faculty/zhang/
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