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Journal ArticleDOI

Performance-based contracts in the sharing economy: A supply chain framework with application of Internet of Things

TL;DR: In this paper, a performance-based contract between a service platform and an outsourcing partner, a vehicle manufacturer in the context of the sharing economy with application of Internet of Things is studied.
Abstract: As an emerging economic mode, the sharing economy has the advantages of improving supply capability and capital utilization. This paper studies a performance-based contract between a service platform and an outsourcing partner, a vehicle manufacturer in the context of the sharing economy with application of Internet of Things. The service platform acquires high-quality products by giving incentives to the manufacturer. To generate more profit with better service, the manufacturer not only improves the product’s performance through quality design in manufacturing but also provides exclusive maintenance in the aftermarket period with the application of Internet of Things. A performance-based contract model between the service platform and the manufacturer is designed to give decision-making suggestions for managers. Managerial implications are extracted by analyzing the operational decisions of the players. Compared with the traditional wholesale price contract, the service platform in the sharing economy can benefit more from a performance-based contract assisted with Internet of Things. The product manufacturer’s preference for a performance-based contract over a traditional wholesale price contract depends on the detailed market circumstances. Managerial guidelines are given on designing performance-based contracts for members of the supply chain.
Citations
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Journal ArticleDOI
TL;DR: Wang et al. as discussed by the authors proposed an intelligent supply chain supervision model by integrating supply chain finance, logistics, and pledge finance models into an operation management platform, which can effectively reduce various external risks and improve operational efficiency.
Abstract: Supply chain finance and logistics activities are developing rapidly. In the economic activities of the tripartite cooperation between financial institutions, logistics enterprises, and loan enterprises, the goods will enter the logistics and supervision links of pledged goods immediately after they are postponed. It is proposed to integrate computer network communication technologies such as the Internet of Things with supply chain finance and logistics supervision to strengthen the information interaction between suppliers, which is widely used in supply chain activities to help realize the Internet finance. An intelligent supply chain supervision can implement monitoring and early warning of the time of the pledged goods in the warehouse, in transit, and during processing. Therefore, this paper proposes an intelligent supply chain supervision model by integrating supply chain finance, logistics, and pledge finance models into an operation management platform to better promote the smooth progress of supply chain finance and logistics supervision activities, which can effectively reduce various external risks, improve operational efficiency, and provide reference for supply chain finance and logistics activities.

2 citations

Journal ArticleDOI
TL;DR: In this paper , the authors proposed a generic approach to measure the level of adoption of digital technologies in logistics processes, and investigated the relationship between the selected market trends, which are external drivers at the strategic level, and the digital maturity of logics processes.
Abstract: Logistics processes allow for the movement of goods along the supply chain to the customers. Companies are using digital solutions more widely to support their logistics processes. Current studies focus mainly on the intrinsic perspective of the digital maturity of logistics processes. Rarely do previous studies consider the impact of external factors (e.g., market trends, as external drivers at the strategic level) on the digital maturity of logistics processes. In this paper, our aim is to propose a novel generic approach to measuring the level of adoption of digital technologies in logistics processes. We applied the maturity model theory to provide a generic framework for the assessment of different partners in supply chains (suppliers, manufacturers, retailers, e-tailers, logistics service providers) in a homogeneous way. We propose the five levels (Avoiding, Discovering, Adopting, Improving, Excelling) to measure the frequency of the application of the digital technologies with high intelligence in the domain of logistics processes. Furthermore, we investigate the relationship between the selected market trends, which are external drivers at the strategic level, and the digital maturity of logics processes. We conducted the survey among a group of 38 companies to classify their maturity level and then to test which market trends motivate them to digitalize their processes. We applied Bayesian statistics to test the level of the relationship between the digitalization of logistics processes and four market trends, namely, the sustainability, e-commerce, sharing economy, and speed-orientation of customers. The results show that all the trends tested moderately and positively influence the digital maturity of logistics processes.

2 citations

Journal ArticleDOI
TL;DR: In this article , the authors developed an analytical framework consisting of two manufacturers and a sharing platform to study the effect of product sharing on competing manufacturers' entry and pricing strategies, and they found that the low-quality manufacturer will always be better off from a moderate rental price.
Abstract: Traditional manufacturers can take part in the sharing economy by renting products to consumers through sharing platforms. We develop an analytical framework consisting of two manufacturers and a sharing platform to study the effect of product sharing on competing manufacturers’ entry and pricing strategies. On the one hand, when the high-quality manufacturer works with the sharing platform, if the perceived quality of renting the high-quality product is larger than that of purchasing the low-quality product, it shows that the high-quality manufacturer will benefit and should enter the sharing market when the rental price is moderate. However, if the perceived quality of renting a high-quality product is smaller than that of purchasing a low-quality product, both manufacturers will always suffer losses; thus, the high-quality manufacturer should not provide sharing. Consequently, when the high-quality manufacturer chooses to share, the quality advantage should be maintained. On the other hand, when the low-quality manufacturer works with the sharing platform, it also finds that the low-quality manufacturer will always be better off from a moderate rental price. This implies that the low-quality OEM has more interest in offering product sharing if the perceived quality of renting high-quality product is smaller than that of purchasing low-quality product.
References
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Journal ArticleDOI
TL;DR: In this article, the authors present empirical evidence on the range and extent of servitization in manufacturing, which suggests that manufacturing firms in developed economies are adopting a range of service-oriented strategies.
Abstract: Commentators suggest that to survive in developed economies manufacturing firms have to move up the value chain, innovating and creating ever more sophisticated products and services, so they do not have to compete on the basis of cost. While this strategy is proving increasingly popular with policy makers and academics there is limited empirical evidence to explore the extent to which it is being adopted in practice. And if so, what the impact of this servitization of manufacturing might be. This paper seeks to fill a gap in the literature by presenting empirical evidence on the range and extent of servitization. Data are drawn from the OSIRIS database on 10,028 firms incorporated in 25 different countries. The paper presents an analysis of these data which suggests that: [i] manufacturing firms in developed economies are adopting a range of servitization strategies—12 separate approaches to servitization are identified; [ii] these 12 categories can be used to extend the traditional three options for servitization—product oriented Product–Service Systems, use oriented Product–Service Systems and result oriented Product–Service Systems, by adding two new categories “integration oriented Product–Service Systems” and “service oriented Product–Service Systems”; [iii] while the manufacturing firms that have servitized are larger than traditional manufacturing firms in terms of sales revenues, at the aggregate level they also generate lower profits as a % of sales; [iv] these findings are moderated by firm size (measured in terms of numbers of employees). In smaller firms servitization appears to pay off while in larger firms it proves more problematic; and [v] there are some hidden risks associated with servitization—the sample contains a greater proportion of bankrupt servitized firms than would be expected.

1,257 citations

Journal ArticleDOI
TL;DR: This paper studies a distribution system in which a manufacturer supplies a common product to two independent retailers, who in turn use service as well as retail price to directly compete for end customers.
Abstract: This paper studies a distribution system in which a manufacturer supplies a common product to two independent retailers, who in turn use service as well as retail price to directly compete for end customers. We examine the drivers of each firm's strategy, and the consequences for total sales, market share, and profitability. We show that the relative intensity of competition with respect to each competitive dimension plays a key role, as does the degree of cooperation between the retailers. We discover a number of insights concerning the preferences of each party regarding competition. For instance, there will be circumstances under which both retailers would prefer an increase in competitive intensity. Our analysis generalizes existing knowledge about manufacturer wholesale pricing strategies, and rationalizes behaviors that would not be evident without both price and service competition. Finally, we characterize the structure of wholesale pricing mechanisms that can coordinate the system, and show that the most commonly used formats (those that are linear in the order quantity) can achieve coordination only under very limiting conditions.

706 citations

Journal ArticleDOI
TL;DR: A multitask principal-agent model is introduced to support resource allocation and use it to analyze commonly observed contracts and study how these contracts evolve over the product deployment life cycle as uncertainty in support cost changes.
Abstract: Performance-based contracting is reshaping service support supply chains in capital-intensive industries such as aerospace and defense. Known as “power by the hour” in the private sector and as “performance-based logistics” (PBL) in defense contracting, it aims to replace traditionally used fixed-price and cost-plus contracts to improve product availability and reduce the cost of ownership by tying a supplier's compensation to the output value of the product generated by the customer (buyer). To analyze implications of performance-based relationships, we introduce a multitask principal-agent model to support resource allocation and use it to analyze commonly observed contracts. In our model the customer (principal) faces a product availability requirement for the “uptime” of the end product. The customer then offers contracts contingent on availability to n suppliers (agents) of the key subsystems used in the product, who in turn exert cost reduction efforts and set spare-parts inventory investment levels. We show that the first-best solution can be achieved if channel members are risk neutral. When channel members are risk averse, we find that the second-best contract combines a fixed payment, a cost-sharing incentive, and a performance incentive. Furthermore, we study how these contracts evolve over the product deployment life cycle as uncertainty in support cost changes. Finally, we illustrate the application of our model to a problem based on aircraft maintenance data and show how the allocation of performance requirements and contractual terms change under various environmental assumptions.

497 citations

Journal ArticleDOI
TL;DR: In this paper, the authors identified cost savings, convenient locations, and guaranteed parking as the most common motivations for carsharing use worldwide, and compared them with other car-sharing services.
Abstract: Carsharing (or short-term auto use) provides a flexible alternative that meets diverse transportation needs across the globe while reducing the negative impacts of private vehicle ownership. Although carsharing appeared in Europe between the 1940s and 1980s, the concept did not become popularized until the early 1990s. For nearly 20 years, worldwide participation in carsharing has been growing. Today, carsharing operates in approximately 600 cities around the world, in 18 nations and on 4 continents. Approximately 348,000 individuals share nearly 11,700 vehicles as part of organized carsharing services (>60% in Europe). Malaysia is operating a carsharing pilot, with a planned launch in 2007. Another eight countries are exploring carsharing. Thirty-three carsharing expert surveys were identified on an international basis. Cost savings, convenient locations, and guaranteed parking were identified as the most common motivations for carsharing use worldwide. An international comparison of carsharing operation...

317 citations

Journal Article
TL;DR: In this paper, the authors review the experience with shared-use vehmte serxqces and explore the potential for the future, focusing on the trend toward expanded services and use of advanced communmatlon and reservation technologies.
Abstract: Most automobiles carry one person and are used for less than one hour per day. A more economically rational approach would be to use vehlcles more intenslvely. Carsharing, in which people pay a subscnption plus a per-use fee, Is one means of doing so. Carsharing may be organlzed through affinity groups, large employers, translt operators, neighborhood groups, or large carshanng businesses. While carsharing does not offer convenient access to vehicles, it does provide users with a large range of vehicles, fewer ownership responsibilities, and less cost (if vehicles are not used intensively). Societal benefits include less demand for parking space and the indirect benefits resultmg from costs being more directly tied to actual usage and vehicles being matched to trip purpose. This article reviews the experience with shared-use vehmte serxqces and explores thelr ,prospects for the future, focusing on the trend toward expanded services and use of advanced communmatlon and reservation technologies

286 citations