Risks and Coordination Mechanisms in Telecom Supply Chains

Agrell, Per Joakim [UCL] Lindroth, Robert Norrman, Andreas

Supply chain management involves the selection, coordination and motivation of independently operated suppliers. The central planner's perspective in operations management translates poorly to vertically separated chains, where suppliers recurrently seem to object to benevolent information sharing and centralized decision rights. Seen from the supplier's perspective, such resistance may very well be rational. A downstream assembly line disclosing reliable information on actual and forecasted sales puts itself at a disadvantage when bargaining on share of chain proâ?¦ts. In this paper, we use a minimal agency model to contrast known optimal mechanisms with the actual practice in the telecommunications industry. A three-stage supply chain under stochastic demand and varying coordination and information asymmetry is modeled. A two-period investment-production game addresses the information sharing and speciâ?¦c investment problem in the telecom industry. The observed price-quantity contracts under limited commitment are shown to be inadequte under realistic asymmetric information assumptions. More a result of gradually evolving changes in bargaining power than coordination efforts, the upstream urge to coordinate may further deteriorate performance in terms of our model.