Showing papers in "Decision Sciences in 2008"

Technology Acceptance Model 3 and a Research Agenda on Interventions

Abstract: Prior research has provided valuable insights into how and why employees make a decision about the adoption and use of information technologies (ITs) in the workplace. From an organizational point of view, however, the more important issue is how managers make informed decisions about interventions that can lead to greater acceptance and effective utilization of IT. There is limited research in the IT implementation literature that deals with the role of interventions to aid such managerial decision making. Particularly, there is a need to understand how various interventions can influence the known determinants of IT adoption and use. To address this gap in the literature, we draw from the vast body of research on the technology acceptance model (TAM), particularly the work on the determinants of perceived usefulness and perceived ease of use, and: (i) develop a comprehensive nomological network (integrated model) of the determinants of individual level (IT) adoption and use; (ii) empirically test the proposed integrated model; and (iii) present a research agenda focused on potential pre- and postimplementation interventions that can enhance employees' adoption and use of IT. Our findings and research agenda have important implications for managerial decision making on IT implementation in organizations.

Cultural Intelligence and Offshore Outsourcing Success: A Framework of Firm-Level Intercultural Capability*

Abstract: This article discusses the importance of firm-level cultural intelligence in the context of international business ventures such as offshoring. We identify the recent movement toward global delivery models in offshoring ventures as the strategic imperative for offshoring partners to acquire and develop firm-level cultural intelligence. Drawing on Earley and Ang's (2003) conceptualization of cultural intelligence and the resource based view of the firm, we develop a conceptual framework of firm-level cultural intelligence. The framework comprises three dimensions of intercultural capabilities of the firm: managerial, competitive, and structural. We propose items to measure these three dimensions and discuss theoretical and managerial implications.

The Role of Culture as Driver of Quality Management and Performance: Infrastructure Versus Core Quality Practices*

Abstract: Increasingly, scholars and practitioners recognize the importance of understanding organizational culture when implementing operations management practices. This study investigates the relationships among organizational culture, infrastructure and core quality management practices, and manufacturing performance using two alternative models. Understanding these relationships is important because culture can provide insight into the context dependence of quality management practices and shed light on the mixed results of past studies concerning the link between quality management and performance. Analysis of manufacturing plants from six countries indicates that organizational culture has a stronger influence on infrastructure quality management practices than on core quality management practices, regardless of whether the plants are located in Eastern or Western countries. In addition, infrastructure quality management practices have a significant effect on manufacturing performance. These results contribute to the quality management literature by emphasizing the importance of accounting for culture when making decisions to implement quality management practices to achieve a performance advantage. Finally, we also contribute to the literature on the culture–performance linkage by finding support for a direct link between culture and manufacturing performance.

Information Technology and Process Performance: An Empirical Investigation of the Interaction Between IT and Non‐IT Resources

Abstract: Drawing on the resource-based view, we propose a configurational perspective of how information technology (IT) assets and capabilities affect firm performance. Our premise is that IT assets and IT managerial capabilities are components in organizational design, and as such, their impact can only be understood by taking into consideration the interactions between those IT assets and capabilities and other non-IT components. We develop and test a model that assesses the impact of explicit and tacit IT resources by examining their interactions with two non-IT resources (open communication and business work practices). Our analysis of data collected from a sample of firms in the third-party logistics industry supports the proposed configurational perspective, showing that IT resources can either enhance (complement) or suppress (by substituting for) the effects of non-IT resources on process performance. More specifically, we find evidence of complementarities between shared business–IT knowledge and business work practice and between the scope of IT applications and an open communication culture in affecting the performance of the customer-service process; but there is evidence of substitutability between shared knowledge and open communications. For decision making, our results reinforce the need to account for all dimensions of possible interaction between IT and non-IT resources when evaluating IT investments.

Global Multisourcing Strategy: The Emergence of a Supplier Portfolio in Services Offshoring

Abstract: In today's global services outsourcing arena, increasing numbers of companies adopt “multisourcing,” that is, they select and combine information technology (IT) and business services from multiple providers. The literature on IT outsourcing and supply chain management has identified critical tradeoffs involved in increasing the number of suppliers and has strongly recommended focusing on a handful of strategic partners to balance these tradeoffs. Committing to a few strategic partners, however, may prevent a firm from discovering new suppliers, or even supply regions. Such missed opportunities may be particularly limiting in the context of offshoring professional services, which has exhibited rapid changes in supplier markets in the last decade. Thus, firms may want to engage in a more intensive multisourcing in services. If they do so, their success will depend on a global sourcing process that effectively addresses the critical tradeoffs involved. To explore how a global sourcing process can support multisourcing, we conducted a qualitative longitudinal case study of a large financial services institution that developed a varied global supply base to obtain offshore professional services. Our analysis results in a theory that emphasizes (i) advantages of a multiple provider strategy in rapidly changing global supply markets; (ii) the critical role of middle managers in enabling continuous innovation in the supplier structure; and (iii) the importance of the global sourcing process combining top–down and bottom–up decision making in multisourcing.

Examining the Antecedents and Consequences of CIO Strategic Decision‐Making Authority: An Empirical Study*

Abstract: Despite the strategic importance of information technology (IT) to contemporary firms, chief information officers (CIO) often still have varying degrees of strategic decision-making authority. In this study, we apply the theory of managerial discretion to define CIO strategic decision-making authority and argue that the CIO's level of strategic decision-making authority directly influences IT's contribution to organization performance. We also draw on the power and politics perspective in the strategic decision-making literature to identify the direct antecedents to the CIO's strategic decision-making authority. A theoretical model is presented and empirically tested using survey data collected from a cross-industry sample of 174 matched pairs of CIOs and top business executives through structural equation modeling. The results suggest that organizational climate, organizational support for IT, the CIO's structural power, the CIO's level of strategic effectiveness, and a strong partnership between the CIO and top management team directly influence the CIO's level of strategic decision-making authority within the organization. The results also suggest that the CIO's strategic decision-making authority in the organization directly influences the contribution of IT to firm performance and that effective CIOs have a greater influence on IT's contribution when provided with strategic decision-making authority.

Information Technology Project Escalation: A Process Model*

Abstract: Information technology (IT) a common and costly problem. While much is known about the factors that promote escalation behavior, little is known about the actual escalation process. This article uses an in-depth case study to construct a process model of escalation, consisting of three phases: drift, unsuccessful incremental adaptation, and rationalized continuation. Each phase encompasses several within-phase escalation catalysts and the model also identifies triggering conditions that promote transition from one phase to the next: project framing (antecedent condition), problem emergence, increased problem visibility, and imminent threat to project continuation (triggering the outcome deescalation). The results show that escalation is not necessarily the result of collective belief in the infallibility of a project. Rather, escalation results from continued unsuccessful coping with problems that arise during a project. Furthermore, the results suggest that the seeds of escalation are sown early: the very manner in which a project is framed contributes to whether or not the project will become prone to escalation. As problems ensue, repeated mismatches between attempted remedies and underlying problems contribute to fueling the escalation process. Implications for research and practice are discussed.

Supply Management Under High Goal Incongruence: An Empirical Examination of Disintermediation in the Aerospace Supply Chain

Abstract: Aftermarket sales and profits are becoming an increasingly important part of an original equipment manufacturer’s (OEM) business model. Because replacement parts often do not require further manufacturing, OEMs act as intermediaries in the aftermarket. As with any intermediary, the OEM must concern itself with suppliers disintermediating its supply chain selling replacement parts directly to the OEM’s customers. We frame supply chain disintermediation (SCD) as a principal‐agent contracting problem between an OEM buyer and a supplier. Hypotheses relate contract conditions, goal incongruence, supplier capabilities and contract enforcement to SCD. The data are collected from the aerospace industry using a multimethod study, combining an Internet-based survey with archival data. Causal modeling with structural equation modeling (SEM) shows general support for the hypotheses. Particularly, SCD is positively related to buyer‐supplier goal incongruence. The agency model offers insights that differ from previous transaction-cost-based models of buyer‐supplier relationships. OEM buyers with a lucrative aftermarket should consider aligning goals through incentives rather than relying entirely on economic hostages associated with specific assets.

Explaining Anomalous High Performance in a Health Care Supply Chain

Abstract: An implicit assumption in distributing and coordinating work among independent organizations in a supply chain is that a focal organization can use financial or contractual mechanisms to enforce compliance among the other organizations in meeting desired performance objectives. Absent contractual agreement or financial gain, there is little incentive for independent organizations to coordinate their process improvement activities. In this study, we examine a health care supply chain in which the work is distributed among independent organizations. We use a detailed case study and an abductive reasoning approach to understand how and why the independent organizations choose to coordinate and collaborate in their work. Our study makes two contributions to the literature. First, we use well-established lean principles to explain how independent organizations achieve superior performance despite highly uncertain and variable customer demand—a context considerably different from the origins of lean principles. Second, we forward relational coordination theory to explain why the organizations in this decentralized supply chain coordinate their work. Relational coordination includes the use of shared goals, shared knowledge, and mutual respect for one another's work as primary mechanisms to explain process improvement in the absence of any contractual incentives. Our study constitutes a first step in generating theory for work design and its improvement in decentralized supply chains.

Toward a Typology of Buyer–Supplier Relationships: A Study of the Computer Industry*

Abstract: Buyer–supplier relationship typologies are useful analytical tools for purchasing managers in managing exchange relationships with suppliers and monitoring their purchasing portfolios. Existing buyer–supplier relationship typologies are mainly focused on either relational contents or power-dependence and have limited empirical support for their performance implications. In this study, we developed an alternative buyer–supplier relationship typology that integrates both relational content and power-dependence dimensions, resulting in four generic relationship types: market, power, autonomous-link, and constrained-link relationships. We then performed a longitudinal exploratory investigation of eight leading firms in the U.S. computer industry to explore the performance implications of the typology, using a combinatorial qualitative approach that leverages the strengths of case study research, content analysis, and quasi-experimental design. The results suggest three theoretical propositions. First, the association between the type of buyer–supplier relationships and buyer firm performance varies such that constrained-link relationships are superior in terms of operational efficiency while autonomous-link relationships are superior in terms of product innovation. Second, the positive association between buyer–supplier relational contents (i.e., relationalism) and buyer firm operational efficiency is strengthened as the suppliers' dependence on the buyer firm increases. And finally, the positive association between buyer–supplier relationalism and buyer firm product innovation is weakened as the suppliers' dependence on the buyer firm increases.

A Path to Successful IT Outsourcing: Interaction Between Service‐Level Agreements and Commitment

Abstract: Although service-level agreements (SLAs) are important for IT outsourcing management, appropriate mechanisms for constructing effective SLAs are still poorly understood, leading to inadequate or overcomplicated contracts that are ineffective. This study examines the associations among three distinct sets of SLA characteristics and outsourcing success, as well as the role of commitment in these relationships. Analyzing survey data based on a model theorizing the alignment of SLA characteristics with intended outsourcing objectives, we find that different types of benefits attained through IT outsourcing arrangements are associated with the use of specific contractual dimensions. We also find that commitment, in general, moderates the impact of SLAs on outsourcing success, although the nature of the moderation varies with the different benefits IT outsourcing engagement is intended to achieve. Interestingly, in certain cases—change characteristics for achieving technology benefits, in particular—commitment can be a barrier to the effective use of SLAs in achieving intended outsourcing benefits. As such, our study extends the literature on IT outsourcing, contracting and commitment, as well as provides a general guideline for practitioners to structure effective SLAs and to properly use commitment for managing IT outsourcing engagements to successfully achieve intended benefits.

Managing Interdependence: The Effects of Outsourcing Structure on the Performance of Complex Projects*

Abstract: The outsourcing of complex activities has become a common organizational practice. Yet very little research has focused on the implications of how these activities are divided up among outsourcing partners. Drawing on structural contingency theory, we argue that: (1) because activities within stages of complex projects are highly interdependent, outsourcing structures where owner firms do not maintain high levels of dominance over the activities that are performed will pose control and coordination challenges, leading to poor project performance; (2) the adverse effects of poorly structured outsourcing arrangements will spill over to subsequent project stages when activities are interdependent across project stages; and (3) dividing activities among large numbers of contractors or distributing work evenly among contractors exacerbates coordination and control problems further contributing to poor project performance. Our empirical analysis of 323 capital facility construction projects supports our predictions. Overall, these results provide strong evidence that some outsourcing structures are more costly than others and that because of the nature of complex projects the detrimental effects of poorly structured outsourcing are often not completely observable at the time activities are completed. We discuss the implications of our findings for capital construction and for outsourcing more generally.

Strategic Maneuvers for Outsourcing Flexibility: An Empirical Assessment

Abstract: Tan and Sia (2006) conceptualize outsourcing flexibility within a set of four dimensions: robustness, modifiability, new capability, and ease of exit, and propose a portfolio of preemptive, protective, exploitive, and corrective maneuvers to manage flexibility in outsourcing. In this article, we build upon their proposed framework by anchoring the strategic maneuvers through a multitheoretic lens and empirically validate the research propositions. A survey of 171 outsourcing projects in Singapore was conducted. The findings bear evidence that the four proposed dimensions of outsourcing flexibility are conceptually distinct and that different strategic maneuvers contribute differently to the various flexibility dimensions. The empirical findings also affirm the importance of structuring flexibility for outsourcing success, with some flexibility dimensions manifesting different intensity in enabling outsourcing success for IT outsourcing versus business process outsourcing. We conclude by proposing a more holistic approach for effective flexibility management in outsourcing and highlighting research gaps that may need deeper theorizing and empirical extension.

Pooling Data Across Transparently Different Groups of Key Informants: Measurement Equivalence and Survey Research*

Abstract: Survey research is often deployed in the study of situational issues facing organizations and functions within organizations One particular survey research approach can be described as follows: (1) survey questionnaires involving perceptual questions about a situational issue are administered to key informants, one key informant per unit of analysis; (2) key informants vary in a transparent manner across units of analysis such that groups of these key informants are discernible; and (3) perceptual responses, after data collection, are then pooled to create a single larger data set for subsequent statistical manipulations In this methodological note, we draw attention to this particular survey research approach and ask the question: When is it appropriate to pool data provided by key informants with transparently different demographics across units of analysis so as to create a single larger data set for statistical manipulations? We use a simple example and data from a published study to motivate the relevance and gravity of this methodological question Offering the concept and empirical assessment of measurement equivalence as the answer to this methodological question of data pooling, we prescribe and demonstrate, with the total quality managementcustomer satisfaction relationship, the procedural steps for evaluating the seven subdimensions of measurement equivalence In conclusion, we highlight methods that should be adopted, before data collection, to minimize the risk of violating measurement equivalence After data collection and for the instances when the empirical assessment for measurement equivalence advises against pooling of such data, we also offer suggestions for analyzing such data and presenting associated statistical results

The Effects of Process and Outcome Similarity on Users' Evaluations of Decision Aids*

Abstract: Decision aids (DA) used in online shopping contexts have been shown to improve users' product choices. Given that previous research (e.g., Byrne & Griffitt, 1973) has demonstrated the positive effects of perceived similarity on an individual's evaluation of others, this study investigates the effects of users' perceived similarity with a DA on their evaluations of that DA. More specifically, we investigate the effect of users' perceptions of the similarity between their own decision process and that followed by the DA to arrive at a recommendation (decision process similarity), as well as the similarity between the recommendations made by the DA and users' initial choices (outcome similarity), on their evaluations of the DA's usefulness and trustworthiness. The results of this study show that perceived process similarity exerts positive and significant effects on users' perceptions of the DA's usefulness and trustworthiness. However, the effects of perceived outcome similarity on trust are completely mediated by perceived process similarity. It is also observed that the level of the user's domain knowledge moderates the effects of perceived decision process similarity on both perceived usefulness and trustworthiness. These results have implications for DA design. It is important that designers consider the process by which users make decisions for themselves and align the DA's decision process with those of the user's, especially for the novice user. The full mediation of the effect of outcome similarity on trust by process similarity highlights how a similar decision process can mitigate some of the negative effects of outcome dissimilarity.

Outsourcing and Performance in Entrepreneurial Firms: Contingent Relationships with Entrepreneurial Configurations*

Abstract: This article develops and examines an empirical typology of entrepreneurial firms, based on organizational and life cycle characteristics. Results indicate five entrepreneurial configurations representing the essential contingent features of age, size, innovation, and governance structure (Elders, Giants, Innovators, and Owners) and one configuration representing a mix of all features (Balanced). We found that (i) outsourcing affected financial performance in entrepreneurial firms and (ii) configurations moderated this relationship. Results support the use of salient contingent features of age, size, innovation, and governance structure to predict outsourcing effectiveness in the entrepreneurial configurations. That is, entrepreneurial firms that aligned their configurational characteristics with outsourcing tended to have greater gains in financial performance. From a resource dependency perspective, managing these alignments has important implications for entrepreneurial firm performance.

RFID as an Enabler of Improved Manufacturing Performance

Abstract: The use of radio frequency identification (RFID) versus bar coding has been debated with little quantitative research about how to best use RFID's capabilities and when RFID is more advantageous. This article responds to that need by qualitatively and quantitatively analyzing how RFID facilitates increased traceability and control in manufacturing, which in turn enables the use of more lot splitting and smaller lot sizes. We develop insights about operating policies (RFID vs. bar-code tracking mechanisms, extent of lot splitting, and dispatching rules) and an operating condition (setup to processing time ratio) that affect the mean flow time and proportion of jobs tardy in a job shop. A simulation model is used to control factors in the experimental design and the output is evaluated using analysis of variance. The results show the following: (i) performance worsens when bar coding is used with extensive lot splitting, (ii) process changes such as extensive lot splitting may be required to justify RFID use instead of bar coding, (iii) the earliest operation due date dispatching rule offers an attractive alternative to other rules studied in previous lot splitting research, and (iv) the performance improvements with RFID and increased lot splitting are larger when the setup to processing time ratio is smaller. In a broader context, we fill a research void by quantitatively showing how RFID can be used as an advanced manufacturing technology that enables more factory automation and better performance along several dimensions. The article concludes by summarizing the results and identifying ideas for future research.

Measurement Equivalence Using Generalizability Theory: An Examination of Manufacturing Flexibility Dimensions

Abstract: As the field of decision sciences in general and operations management in particular has matured from theory building to theory testing over the past two decades, it has witnessed an explosion in empirical research. Much of this work is anchored in survey-based methodologies in which data are collected from the field in the form of scale items that are then analyzed to measure latent unobservable constructs. It is important to assess the invariance of scales across groups in order to reach valid, scientifically sound conclusions. Because studies have often been conducted in the field of decision sciences with small sample sizes, it further exacerbates the problem of reaching incorrect conclusions. Generalizability theory can more effectively test for measurement equivalence in the presence of small sample sizes than the confirmatory factor analysis (CFA) tests that have been conventionally used for assessing measurement equivalency across groups. Consequently, we introduce and explain the generalizability theory (G-theory) in this article to examine measurement equivalence of 24 manufacturing flexibility dimension scales that have been published in prior literature and also compare and contrast G-theory with CFA. We show that all the manufacturing flexibility scales tested in this study were invariant across the three industry SIC groups from which data were collected. We strongly recommend that G-theory should always be used for determining measurement equivalence in empirical survey-based studies. In addition, because using G-theory alone does not always reveal the complete picture, CFA techniques for establishing measurement equivalence should also be invoked when sample sizes are large enough to do so. Implications of G-theory for practice and its future use in operations management and decision sciences research are also presented.

Valuate Outsourcing Contracts from Vendors' Perspective: A Real Options Approach

Abstract: To date, most applications of real options theory (ROT) in outsourcing literature are modeled from the clients’ side. Little attention has been paid to vendors’ options in outsourcing. In this article, we study outsourcing from the vendors’ perspective by analyzing vendors’ value of waiting. The contribution of our research to the literature lies in our analysis of a model that compensates for vendors’ loss of option to wait since they have to exercise outsourcing contracts at clients’ given timing. Such a compensation-oriented model yields new insights about the vendors’ valuation of outsourcing opportunities, and offers important practical guidance to vendors’ decision making.

Offshoring and Cross‐Border Interorganizational Relationships: A Justice Model*

Abstract: In this article, we develop an interorganizational justice model to explain cross-border interorganizational relationships. The model contends that cultural distance (construed as the cultural differences between offshoring partners) would influence behavioral uncertainty and the boundary spanners' perceptions of justice. Specifically, the model predicts that high levels of behavioral uncertainty are likely to reduce relational commitment, whereas low levels of behavioral uncertainty are likely to enhance relational commitment. However, boundary spanners' perceptions of distributive, procedural, and interactional justice would mitigate the negative impact of behavioral uncertainty on relational commitment. The model also predicts that culturally similar boundary spanners would be more likely to share similar perceptions of distributive, procedural, and interactional justice than culturally dissimilar boundary spanners. This model has implications for further theoretical discussion and empirical research as well as management practice. Managers could use the interorganizational justice model to assess shared perceptions of justice among boundary spanners and develop transcultural justice competencies.

Understanding the Determinants of Service Channel Preference in the Early Stages of Adoption: A Social Cognitive Perspective on Online Brokerage Services*

Abstract: In today’s increasingly technology-mediated world, individuals are often confronted with a decision of whether to obtain services through online, self-service technologies or traditional, nontechnological alternatives Understanding the mechanisms by which consumers choose among these competing service channels represents an important concern for organizations, consumers, and Web site designers This study develops a research model based on Social Cognitive Theory to explain and predict service channel preferences that arise in the early stages of adoption, before a consumer conducts business using a particular channel The model is subsequently tested in the brokerage services context, using observations obtained via survey Given the growing popularity of online investing combined with the challenging prospect of making optimal decisions in an inherently risky environment, the context offers insights of practical and theoretical importance The results suggest that task-specific self-efficacy beliefs serve as the activating mechanism kicking off a chain of psychological events that entice consumers to favor a particular service channel Higher levels of self-efficacy induce individuals to prefer the online approach In addition to its direct effect on preference for the online service channel, higher levels of self-efficacy influence one’s propensity to take risks and expectations of performance-oriented rewards, which, in turn, sway consumers to favor the online service channel Furthermore, self-efficacy and perceptions concerning the credibility of online information interact to affect service ∗ This article is dedicated in memory of the corresponding author’s mother, Margaret A Looney, who recently lost a courageous battle with cancer The corresponding author would like to thank Ron and Judy Paige, who provided resources and funding for this research through a faculty fellowship The authors sincerely appreciate the insightful comments of the editors and reviewers on earlier versions of this manuscript † Corresponding author

Judgmental adjustments of previously adjusted forecasts

Abstract: Forecasts are important components of information systems. They provide a means for knowledge sharing and thus have significant decision-making impact. In many organizations, it is quite common for forecast users to receive predictions that have previously been adjusted by providers or other users of forecasts. Current work investigates some of the factors that may influence the size and propensity of further adjustments on already-adjusted forecasts. Two studies are reported that focus on the potential effects of adjustment framing (Study 1) and the availability of explanations and/or original forecasts alongside the adjusted forecasts (Study 2). Study 1 provides evidence that the interval forecasts that are labeled as "adjusted" are modified less than the so-called "original/unadjusted" predictions. Study 2 suggests that the provision of original forecasts and the presence of explanations accompanying the adjusted forecasts serve as significant factors shaping the size and propensity of further modifications. Findings of both studies highlight the importance of forecasting format and user perceptions with critical organizational repercussions.

Search for Alternatives and Collaboration with Incumbents: Two‐Sided Sourcing Behavior in Business Markets*

Abstract: Sourcing strategies in business markets have been considered separately and the practice of two-sided sourcing behavior—engaging in search for alternative suppliers and collaboration with an incumbent supplier—has not been examined. To fill that gap, we first identify boundary conditions under which the poor performance of an incumbent supplier intensifies an original equipment manufacturer's (OEM) search and collaboration. Then, we examine how an OEM's two-sided sourcing behavior influences one of the critical elements of sourcing performance: the responsiveness of the incumbent supplier. Our proposed hypotheses were tested with data from a national survey of 539 OEM purchasing managers in the Japanese electronics industry. The analysis results indicate three main findings. First, two environmental conditions—pace of technological change and volume uncertainty—have contrasting influences on the link between incumbent supplier performance and an OEM's search and collaboration. While uncertainty from the upstream channel (pace of technological change) enhances an OEM's search and collaboration, uncertainty from the downstream channel (volume uncertainty) lowers an OEM's search and collaboration. Second, an OEM's dependence on its incumbent supplier has differential effects: an OEM reduces search as its dependence on incumbent supplier increases, while it enhances collaboration as its dependence on incumbent supplier increases. Third, while search alone has a negative effect on responsiveness of an incumbent supplier, engaging in two-sided sourcing behavior (i.e., combining search with collaboration) has a positive effect on responsiveness of the incumbent supplier.

Sourcing Research as an Intellectual Network of Ideas

Abstract: What are the current intellectual clusters in the sourcing literature? How do these clusters relate to each other? How has sourcing-related research changed over the last 10 years? We respond to these questions by examining the intellectual structure of research in the sourcing literature across 21 journals during the last decade (1998– 2007). Multidimensional scaling is used to analyze cocitation data involving 72,003 citations from 1,960 sourcing articles. The results indicate that 10 different sourcing clusters emerged in the 1998–2002 period and 6 sourcing clusters surfaced in the 2003– 2007 period. Five of the intellectual clusters in 1998–2002 disappeared in 2003–2007, five clusters remained, and one new cluster materialized in 2003–2007 that did not exist in the earlier period (Managerial Behavior and Upstream Decision Making). Subject Areas: Procurement, Purchasing Sourcing, and Supply Management.

Reverse Auctions with Multiple Reinforcement Learning Agents

Abstract: Reverse auctions in business-to-business (B2B) exchanges provide numerous benefits to participants. Arguably the most notable benefit is that of lowered prices driven by increased competition in such auctions. The competition between sellers in reverse auctions has been analyzed using a game-theoretic framework and equilibria have been established for several scenarios. One finding of note is that, in a setting in which sellers can meet total demand with the highest-bidding seller being able to sell only a fraction of the total capacity, the sellers resort to a mixed-strategy equilibrium. Although price randomization in industrial bidding is an accepted norm, one might argue that in reality managers do not utilize advanced game theory calculations in placing bids. More likely, managers adopt simple learning strategies. In this situation, it remains an open question as to whether the bid prices converge to the theoretical equilibrium over time. To address this question, we model reverse-auction bidding behavior by artificial agents as both two-player and n-player games in a simulation environment. The agents begin the game with a minimal understanding of the environment but over time analyze wins and losses for use in determining future bids. To test for convergence, the agents explore the price space and exploit prices where profits are higher, given varying cost and capacity scenarios. In the two-player case, the agents do indeed converge toward the theoretical equilibrium. The n-player case provides results that reinforce our understanding of the theoretical equilibria. These results are promising enough to further consider the use of artificial learning mechanisms in reverse auctions and other electronic market transactions, especially as more sophisticated mechanisms are developed to tackle real-life complexities. We also develop the analytical results when one agent does not behave strategically while the other agent does and show that our simulations for this environment also result in convergence toward the theoretical equilibrium. Because the nature of the best response in the new setting is very different (pure strategy as opposed to mixed), it indicates the robustness of the devised algorithm. The use of artificial agents can also overcome the limitations in rationality demonstrated by human managers. The results thus have interesting implications for designing artificial agents in automating bid responses for large numbers of bids where human intervention might not always be possible.

The Usage of Opportunity Cost to Maximize Performance in Revenue Management

Abstract: To meet customer requirements efficiently, a manager needs to supply adequate quantities of products, capacity, or services at the right time with the right prices. Revenue management (RM) techniques can help firms use differential pricing strategies and capacity allocation tactics to maximize revenue. In this article, we propose a marginal revenue-based capacity management (MRBCM) model to manage stochastic demand in order to create improved revenue opportunities. The new heuristic employs opportunity cost estimation logic that is unique and is the reason for the increased performance. The MRBCM model generates order acceptance policies that allocate available capacity to higher revenue generating market segments in both service and manufacturing environments. To evaluate these models, we design and conduct simulation experiments for 64 scenarios using a wide range of operating conditions. The experimental results show that the MRBCM model generates significantly higher revenues over the first come, first served rule when capacity is tight. In addition, we also show that the MRBCM model generally performs better than a recent RM model published in the literature.

COMMENTARY: Silver Bullet Junkies and the Codifiers That Love Them: Behavioral Roots Behind a Legacy of Bad Modeling and Use

Abstract: As research continues to evolve, it is important to look back with a critical eye on its impact on practice and what is guiding its trajectory into the future. In this work we discuss some of the key behavioral drivers that taken as a whole have made for a less than ideal relationship between research, model development, and use/reliance in practice. From a general public-good perspective, there is an obvious need for academics to take on a greater role of responsibility when it comes to both research and curriculum in an effort to avoid some of the failings that our past work has inevitably encouraged to date.

Optimal Quantity Discount Design with Limited Information Sharing

Abstract: In this article we address the optimal quantity discount design problem of a supplier in a two-stage supply chain where the supplier and the buyer share annual demand information only. The supply chain faces a constant deterministic demand that is not price sensitive and operates with fixed setup costs in both stages. We show that the supplier can actually moderate a cost-minimizing buyer to order in quantities different than the buyer's optimal order quantity in the traditional setting and develop a multi-breakpoint quantity discount scheme that maximizes supplier's expected net savings. The proposed multi-breakpoint discount scheme can be easily computed from the available information and, while also maximizing the supplier's net savings, is very effective in achieving high levels of supply chain coordination efficiency in the presence of limited information.

Determinants of Interoutsourcing: An Analytical Approach

Abstract: Interoutsourcing is a round-way process in which the vendor is its customer's customer and the customer is its vendor's vendor. While interoutsourcing is emerging as a prominent outsourcing strategy in many industries, there are no rigorous analytical studies focusing on this mechanism. In this article, we analytically demonstrate the efficacy of interoutsourcing by comparing it with normal outsourcing. Our results show that, compared with normal outsourcing, interoutsourcing acts as a self-enforcer of vendor firms' behaviors toward increasing outsourcing service value. However, in situations where there is a mismatch of outsourcing activities, a high degree of incentive that is based on outsourcing service value, and a high cost of capital, interoutsourcing is not preferred to normal outsourcing. We discuss these results in detail and provide managerial implications for firms involved in interoutsourcing decisions.