Thesis (MBA) -- Stellenbosch University, 2006. / ENGLISH ABSTRACT: The main objective with this study was to analyse and evaluate the strategies employed by South African Breweries in the implementation of ERP systems with specific reference to the Strategic Enterprise Management (SEM) model. The study would have further identified the key success factors of implementing ERP systems and state the reasons for ERP system implementation failure. The combination of intense global compeution and powerful new information technologies has led to a rush toward ERP systems and intensified efforts to re-engineer organisational processes. Although most ERP systems are justified on the basis that they integrate disparate organisational systems or standardise organisational processes on best practice, most businesses find that the costs and risks are significantly more than benefits during the early stages following implementation of an ERP system. Some businesses have however been able to transform their supply chain processes as result of ERP implementation. Businesses must overcome daunting challenges fn order to generate value from ERP systems. ERP systems typically consist of modules, each with functionality relating to organisational functions, such as production, finance, human resources and logistics. Development and sales of ERP systems rapidly increased between 1992 and 1999 when most large corporations, which could typically make use of these systems, installed these systems. The market has recently slowed down and ERP software developers now face strong competition and are challenged to find new ways to differentiate products from those of competitors. New information systems have been developed to complement and even replace ERP systems such as Advanced Planning Systems (APS) and Supply Chain Management systems (SCM). The successful implementation of ERP systems are largely dependant on the way that a company approaches, considers and implements ERP systems. It is important to note that ERP systems implementations are not just another IT project or project implementation, but has a human element attached to the implementation process that is centric to the success of the implementation process. The study concluded that the top contributor for a successful ERP implementation is getting the employees and all persons in the process involved, on board and motivated by the process of implementation. Other important factors are a strong commitment from upper management as an implementation involves significant alterations to existing business practices, issues related to reengineering the business processes and integrating the other business applications to the ERP backbone. Upper and middle management plays a key role in managing the change that ERP brings into an organisation. It must be noted that once implemented, an ERP system is difficult and expensive to undo. In addition organisations may have to implement custom applications in addition to the ERP software as no single ERP solution can satisfy all the business needs. It is apparent that most ERP implementation successes are attributable to excellent planning, employee involvement and effective communication. Thus it is imlXlrtant for an organisation to have the above as top priorities in ERP implementation. Successful ERP implementation will be greatly enhanced if the employees are properly involved in the process and are given the necessary recognition and respect they deserve. Without dedicated employees to implement and apply the system, the organisation will be wasting its resources and capital on a system that will never be fully utilised. Although an ERP implementation effort can be completed by consultants, problems will arise if the proper employees are not available to sUPlXlrt the project. The trained employees who grow with the system and make the system expand and evolve with the company, will be true assets of the company and more than worth the investment. / AFRIKAANSE OPSOMMING: Die doelwit van die studie was om die strategie toegepas deur Suid Afrikaanse Brouery tydens implementering van Ondememing Hulpbron Beplanning (OHS) stelsels te analiseer en evalueer met 'n spesiale fokus op die Strategiese Ondememing Bestuur (SOB) model. Die studie identifiseer ook die sleutel sukses faktore vir die implementering van aHS stelsels en bespreek die redes vir onsuksesvolle aHB stelsel impJementering. Die kombinasie van intense globale kompetisie en kragtige nuwe inligtingstelsels het aanleiding gegee tot 'n toename in aHB stelsels en het gelei tot hemude fokus op proses herstrukturering. Nieteenstaande die feit dat meeste aHB stelsels geregverdig kan word op grand van hulle integrasie van losstaande organisasie stelsels of standaardisasie van organisasie prosesse en beste praktyke, vind die meeste besighede dat die koste en risiko tydens die eerste fases na implementering betekenisvol meer is as die voordele. Sommige besighede was egter in staat om hulle verskaffingsketting prosesse te transformeer deur die implementering van aHB stelsels. Besighede moet egter oorweldigende uitdagings oorkom om waarde te genereer met aHB stelsels. aHB stelsels betaan tipies un verskeie modules, met elkeen funksionaliteite wat betrekking het op die besigheids funksies soos produksie, finansies, menslike hupbronne en logistiek. Die ontwikketing en verkope van aHB stelsels het drasUes toegeneem sedert 1992 tot 1999 toe meeste groot besighede wat kon gebruik maak van die stelsels, dit implementeer het. Die mark het onlangs afgeneem en aHB sagteware ontwikkelaars word nou gekonfronteer met strawwe kompetisie en moet nuwe maniere vind om hulle prod uk te onderskei van die kompetisie. Nuwe inligting stelsels is ontwikkel wat bestaande aHB stelsels komplimenteer en selts vervang soos byvoorbeeld Gevorderde Beplanning Stelsels (GBS) en Verskaffingketting Bestuur stelsels (VKB). Die suksesvolle implementering van aHB stelsels is grootHks afhanklik van die wyse waarop 'n besigheid OHB stelsels benader, oorweeg en implementeer. Dit is belangrik om in gedagte te hou dat OHB stelsel impfementering nie net nog 'n IT projek of projek implememtering is nie, maar dat daar 'n menslike element in die implementering proses betrokke is wat 'n kernfaktor in die sukses van die implementering is. Die studie het tot die slotsom gekom dat die hoof bydraende faktor tot suksesvolle implementering van OHB stelsels is om wer1<.nemers en aile relevante persone Ie betrek en te motiveer met die implementerings proses. Ander belangrike faktore sluit in onderneming van senior bestuur aangesien implementering bekenisvolle veranderinge aan bestaande praktyke behels asook die herontwerp van besigheids prosesse en integrasie van ander besigheids toepassings. Middel en senior bestuur het 'n integrale rol in die bestuur van verandering wat OHB stelsels in die firma teweeg bring. Dit is belangrik om kennis te neem dat OHB stelsels na implementering moeilik en teen hoe koste ongedaan gemaak kan word. Besighede mag selfs nodig he om addisionele toepassings te implementeer aangesien geen OHB sagteware stelsels aan aile besigheidsbehoeftes kan voldoen nie. Dit is duidelik dat die meeste OHB implementering suksesse toegeskryf kan word aan uitstekende beplanning, werknemer betrokkenheid en effektiewe kommunikasie. Dit is dus noodsaaklik vir die firma om begenoemde as die hoogste prioiriteite vir die implementering van OHB stelsels na te volg. Suksesvolle OHB stelsel implementering word grootliks bevorder indien die werknemers deeglik betrokke is in die proses, asook die nodige erkenning en respek ontvang. S~nder toegewyde werknemers om die stelsel Ie implementeer en toe te pas sal die organisasie hulpbronne en kapitaal vermors op 'n stelsel wat nooil ten volle benut sal word nie. AJhoewel OHB implementering gekomplimenteer kan word deur konsultante sal daar probleme ontstaan indien die toepaslike werknemers nie beskikbaar is om die projek te ondersteun nie. Die opgeleide werknemer wat saam met die stelsel groei en wat die stelsel help uitbrei en ontwikkel saam met die organisasie is 'n ware aanwins vir die firma en meer as die belegging werd

Title: Reducing Supplier Lead time – a case study on Supplier Lead Time at purchasing companies Authors: Johanna Jönsson and Melinda Luong Tutor: Dr. Åsa Gustavsson Examiner: Dr. Lars-Olof Rask Course code: 4FE06E - Master Thesis _________________________________________________________________________ Research questions: ●  How are companies working with and defining Supplier Lead Time? ●  What activities are included to reduce Supplier Lead Time? ●  How can companies further develop their work to reduce Supplier Lead Time? Purpose: The purpose of this Master Thesis is to describe and explain how purchasing companies are working to reduce Supplier Lead Time, in order to maintain or achieve an efficient and flexible supply chain. Moreover the study aims to recommend what approaches companies could further use to reduce Supplier Lead time. Method: To answer these research questions the authors have done two case studies. The theoretical material has been collected and processed, which has formed the basis for the semi-structured interview guide that was answered by the interviewees. The authors also attended meetings to get other inputs about the subject. Conclusion: IKEA Components are today taking different actions to improve the SLT but can improve their volume agreements (AGV) by aligning all involved parts and have a functional leader that makes sure that they follow it up. At IKEA IMS the authors recommend them to work with volume commitments with suppliers and develop a clearer structure for who is responsible for improving the SLT and evaluating it. Keywords Supply chain management, Supplier Lead Time, Reducing Supplier Lead Time, Organization management, Performance evaluation

The relaxation of international boundaries has enabled the globalisation of markets making available an ever increasing number of specialised suppliers and markets. Inevitably this results in supply chains sharing suppliers and customers reflected in a network of relationships. Within this context firms buyers configure their supply relationships based on their perception of supply risk. Risk is managed by either increasing trust or commitment or by increasing the number of suppliers. Increasing trust and commitment facilitates collaboration and reduces the propensity for a supplier to exit the relationship. Conversely, increasing the number of suppliers reduces dependency and increases the ease of making alternative supply arrangements. The emergent network of relationships is dynamic and complex, and due in no small part to the influence of inventory management practices, tightly coupled. This critical organization of the network describes a system that contrary to existing supply chain conceptualisation exists far from equilibrium, requiring a different more appropriate theoretical lens through which to view them. This thesis adopts a Complex Adaptive Systems (CAS) perspective to position supply networks as tightly coupled complex systems which according to Normal Accident Theory (NAT) are vulnerable to disruptions as a consequence of normal operations. The consequential boundless and emergent nature of supply networks makes them difficult to research using traditional empirical methods, instead this research builds a generalised supply network agent based computer model, allowing network constituents (agents) to take autonomous parallel action reflecting the true emergent nature of supply networks. This thesis uses the results from a series of carefully designed computer experiments to elucidate how supply networks respond to a variety of market structures and permitted agent behaviours. Market structures define the vertical (between tier) and horizontal (within tier) levels of price differentiation. Within each structure agents are permitted to autonomously modify their prices (constrained by market structure) and collaborate by sharing demand information. By examining how supply networks respond to different permitted agent behaviours in a range of market structures this thesis makes 4 contributions. Firstly, it extends NAT by incorporating the adaptive nature of supply network constituents. Secondly it extends supply chain management by specifying supply networks as dynamic not static phenomena. Thirdly it extends supply chain risk management through developing an understanding of the impact different permitted behaviour combinations on the networks vulnerability to disruptions in the context of normal operations. Finally by developing the understanding how normal operations impact a supply networks vulnerability to disruptions it informs the practice of supply chain risk management.

Maintaining the current course of the global society is threatening the human civilization. The urgency of the situation, understood from empirical research, has caused many researchers to call for more prescriptive research as a necessary supplement, to better support decision making for sustainability. While policymakers need to direct and stimulate sustainable production and consumption through, e.g., legislation and market phenomena such as eco-labelling, business represents a significant proportion of the necessary resources, capabilities and mechanisms for the innovation needed for a transition towards sustainability. However, while businesses more and more realize the self-interest in working proactively with sustainability, there is a desire for better support for how to do this also from this end. Such support needs to consider a significant shift going on in business; that individual businesses tend to no longer compete as autonomous entities, but rather as supply chains. Thus, no company is more sustainable than its supply chain partners. Therefore, sustainable supply chain management (SSCM) as a business function, and sustainable procurement as a subset thereof, plays an increasingly pivotal role for sustainable development. The overall aim of this thesis is to contribute to sustainable development by studying how three phenomena; eco-labelling, procurement and supply chain management are related to each other and to a strategic sustainability perspective, and to suggest how these phenomena can be integrated with such a perspective to provide better support for decision making and innovation for sustainability. For this purpose, a framework for strategic sustainable development, including a definition of sustainability and generic guidelines to inform stepwise strategic plans towards sustainability, is used as a foundational methodology. The development of new approaches is also based on case studies with eco-labelling and sustainable public procurement bodies, businesses and public institutions. Information is collected by shadowing of criteria development and collaboration processes, interviews and literature studies. While the findings point to a clear rational for all of the phenomena and several strengths in existing schemes and practices, the findings also point to several shortcomings. Sustainability is not defined, and as a result, there is no foundation for strategic and proactive approaches. Furthermore, decisions are not based on considerations of all dimensions of sustainability, the whole life cycle of products, all relevant stakeholders and a long-term perspective. As a result, the full potential of these phenomena for contributing to sustainable development is not utilized. This thesis prescribes enhanced processes for eco-labelling, sustainable procurement and SSCM, and shows how these can support organisations in developing from reacting individually on known sustainability-related problems to acting proactively and collaboratively in supply chains, in a coordinated and economically viable way, on society’s remaining gap to the full scope of ecological and social sustainability.

The role of a purchaser has traditionally focused on acquiring standard items at the lowest possible cost. The ability to reduce unit cost has been the key performance indicator for purchasers. Most traditional purchasing strategies thus focus on optimizing this situation, focusing on the supplier interface only and not on customer value. However, for many manufacturing companies, the demand from their customers has changed lately. Not only low‐cost standard products but also customized products and short delivery lead times is increasingly required. In order to contribute to the focal actor’s competitiveness, purchasers need a purchasing strategy that supports customer value creation and thus differentiates between acquiring standard items and acquiring customized items. Accordingly, not only the focal actor’s interaction with the supplier needs to be regarded in the purchasing situation, but also the interaction with the focal actor’s customer. This is defined as customer‐driven purchasing in this research. The purpose of this research is to develop knowledge that contributes to increased competitiveness of manufacturing companies. The manufacturer can increase competitiveness by further utilizing knowledge available in manufacturing strategy in the purchasing situation. The main objective of this dissertation is to analyze the competitiveness in customer‐driven purchasing and to develop a method for customerdriven purchasing by aligning supplier interaction with customer‐driven manufacturing. The method for customer‐driven purchasing (the CDP method) was developed in collaboration with Combitech AB, Ericsson AB, Fagerhult AB, Husqvarna AB, Parker Hannifin AB, and Siemens Turbomachinery AB. The CDP method consists of three phases, divided into twelve steps. The first phase focuses on identifying strategic lead times and differentiating between varying circumstances for the purchased items. The second phase focuses on analyzing customer‐driven manufacturing while the third phase focuses on analyzing supplier interaction. The method is concluded with the implementation of customer‐driven purchasing. When applying the three phases of the CDP method, the case companies have experienced a better alignment between customer expectations and supplier performance since the competitive priorities to pursue in a supplier interaction are identified and taken action upon. Direct visible results of implementing the model are, for example, shortened supply lead time for customized items, and reduced inventory levels for standard items. The CDP method has also helped the companies to identify critical suppliers and how the supplier interaction should be affected by the customer demand for the purchased item. Several indirect results have also been reported, such as, improved internal communication, and a better balance between short supply lead time and low cost. Thus the need to differentiate and balance the goals and key performance indicators for purchasers has become evident. Applying the CDP method has been seen as an important learning process in which the objectives of purchasing and manufacturing are aligned for improved competitiveness. This contributes to establishing purchasing as a strategically important competitive function and to support a holistic view of the focal actor’s competitiveness. / Traditionellt har inköparens roll varit att anskaffa standardartiklar till lägsta möjliga kostnad. Förmågan att reducera kostnaden per inköpt artikel har också ofta varit det viktigaste nyckeltalet för inköp. De flesta inköpsstrategier fokuserar därför på att optimera denna situation och därmed endast på gränssnittet mot leverantör, inte på att skapa kundvärde. För många tillverkande företag har dock efterfrågan från kunderna ändrats; numera efterfrågas inte bara standardartiklar till lägsta möjliga kostnad utan även kundanpassade artiklar som kan levereras med kort leveransledtid och med bibehållen låg kostnad. För att kunna bidra till företagets konkurrenskraft behöver inköparna därför få tillgång till en inköps‐strategi som stöder skapandet av kundvärde och därför skiljer inköpssituationer där standardartiklar ska anskaffas från situationer där kundanpassade artiklar ska anskaffas. En sådan inköpsstrategi tar därför inte bara hänsyn till samverkan med leverantören utan även till det tillverkande företagets kund. Detta definieras som kunddrivet inköp i denna avhandling. Syftet med denna forskning är att utveckla kunskap som bidrar till ökad konkurrenskraft för tillverkande företag. Tillverkaren kan öka sin konkurrenskraft genom att skapa sig ett helhetsperspektiv på produktion och inköp där inköpsstrategier och leverantörsrelationer ligger i linje med aktuella produktionsstrategier. Målet med denna avhandling är att anlysera konceptet kunddrivet inköp och att utveckla en metod för kunddrivet inköp genom att samordna inköpsstrategier och produktionsstrategier. Metoden för kunddrivet inköp (KDI‐metoden) har tagits fram i samverkan med Combitech AB, Ericsson AB, Fagerhult AB, Husqvarna AB, Parker Hannifin AB och Siemens Turbomachinery AB. KDI‐metoden består av tre faser uppdelade på 12 steg. Första fasen fokuserar på att identifiera strategiska ledtider och att differentiera mellan olika förutsättningar för de inköpta artiklarna. Den andra fasen fokuserar på att analysera förutsättningarna för kunddriven produktion, och tredje fasen fokuserar på att analysera förutsättningarna för leverantörssamverkan. Metoden avslutas med att kunddrivet inköp implementeras på företaget. Vid implementeringen av KDI‐metoden har de medverkande företagen upplevt ett tydligare fokus på strategisk nivå gällande ledtider och uppdelning mellan prognosdrivna och kundorderdrivna artiklar. Detta har lett till en ökad samordning mellan kundkrav och leverantörsprestationer eftersom kritiska konkurrensfaktorer har identifierats och kommunicerats. Implementeringen av metoden har fått både direkta och indirekta resultat. Exempel på direkta resultat är minskad ledtid för kundanpassade artiklar och reducerade lagernivåer för standardartiklar. KDI‐metoden har också hjälpt företagen att identifiera vilka leverantörer som är avgörande för konkurrenskraften och hur samverkan med dessa leverantörer bör påverkas av kundefterfrågan på den inköpta artikeln. Exempel på indirekta resultat är bland annat förbättrad intern kommunikation och en företagsgemensam insikt att mål och mätetal för inköpare måste differentieras med hänsyn till typ av artikel som köps in. Detta har lett till en förbättrad balans mellan strävan efter korta ledtider och strävan efter låg inköpskostnad. Implementeringen av KDI‐metoden har hos de medverkande företagen setts som en viktig lärprocess genom vilken företaget har tydliggjort och samordnat de interna målen gällande ledtid och kostnad. Genom att skapa denna helhetssyn får inköp och produktion samma förutsättningar för att bidra till kundvärde. Företagets konkurrenskraft får därför direkt stöd av KDI‐metoden.

<p> </p><p>This research puts forth a new perspective on cash-to-cash cycle, a performance metric that relates to both finance and supply chain management. In criticism of the existing literature, which virtually views the firm as an isolate body, we look at cash to cash cycle optimization through a supply chain lens, in the hope of being able to formulate a more discreet approach. Our study involves a literature review followed by a case study featuring Dell Inc., the American PC manufacturer. The authors discuss the effects of C2C optimization by dissecting the metric into its 3 constituents,whereby we are able to examine the effects of different C2C optimization methods separately. We bring up the caveats posed by these individual methods and also uncover the cases where reciprocal improvement opportunities lie. Lastly, we lay out our findings by proposing suggestions to deal with such effects under the defined scenarios.</p><p> </p>

No description available.

<p><strong>Introduction </strong>As the world is becoming increasingly integrated, many firms search for partners overseas with hope to find benefits. Internationalization is today the industrial norm, and in this new and ever-expanding environment, international purchasing has become a major challenge that firms have to face in their daily operations. Yet, despite the growing importance of international purchasing by retailers, previous studies have mainly focused on international purchasing by manufacturing firms, and as the authors have acknowledge the retailers' significance on the national markets, a gap has been identified.</p><p><strong>Purpose </strong>The purpose of this thesis is to examine and map out the current state of Swedish retailers' international purchasing activities.</p><p><strong>Method </strong>In order to fulfill the purpose, a quantitative research was chosen. In total, 74 telephone interviews have been conducted, resulting in a response rate of 80 percent. The sample was based on the 120 largest retailers in Sweden, with regards to turnover.</p><p><strong>Conclusion </strong>Swedish retailers have been grouped into four distinctive clusters; the Veterans, the Freshmen, the Cravens, and the Intellectuals. Each cluster showed clear and specific characteristics that distinguished them from each other. One common feature existed; regarding what risks that were connected with international purchasing. Almost everyone highlighted the loss of control, due to long distances, as being the main risk with international purchasing. The different clusters had diverse suggestions for how to overcome this; the Veterans focused on long-term relationship-building, the Freshmen spread their purchasing activities on multiple suppliers, the Cravens contracted trade companies to take the risk, and the Intellectuals invested in a high level of integration among all actors involved.</p>

Outsourcing of logistical operations is becoming more and more frequent in order to address the needs of a company's supply chain as well as improving customer service and reducing operating costs. The main objective of this study was to provide a guideline to Logistics and Supply Chain Managers on how to successfully implement an outsourcing (3PL/4PL) partnership, as well as identify the pitfalls that should be avoided during the implementation process. To realise this objective an extensive review of the current literature was undertaken on the concept of logistics and the supply chain and how the concept of outsourcing has influenced this concept. The literature presented the following results: ~ Logistics is often perceived as non-core business function to a company and hence suitable as an outsourcing option. ~ Outsourcing of the logistics function should be a strategic decision that offers both a reduction in costs as well as improvements in sales revenue and customer service. ~ Outsourcing is able to contribute value for a company through reduced cost and increased revenue as well as improved service levels due to the specialist nature of the outsourcing partner. ~ Some competitive advantage is possible when choosing a 3PLl4PL to operate your logistics function. ~ The 3PL industry is currently in a state of transition, with many smaller 3PL's consolidating their business efforts to form Lead Logistics Provider companies. An empirical research on the South African perception of the 3PLl4PL industry was then conducted using a structured questionnaire. The results of the questionnaire providing an answer on the state of the 3PLl4PL industry in South Africa along with comments on how successful implementation differed from the failures. From the literature review and the empirical research it was possible to establish recommendation on how to establish a successful outsourcing partnership with a 3PLl4PL, as well as a tool was developed to aid those companies that currently experience problems with their outsourcing partnership. While the outsourcing process is unique to every situation the guidelines offer a generic approach that prevents the prospective outsourcing company from falling into common pitfalls that often lead to failure of the partnership. / Outsourcing of logistical operations is becoming more and more frequent in order to address the needs of a company's supply chain as well as improving customer service and reducing operating costs. The main objective of this study was to provide a guideline to Logistics and Supply Chain Managers on how to successfully implement an outsourcing (3PL/4PL) partnership, as well as identify the pitfalls that should be avoided during the implementation process. To realise this objective an extensive review of the current literature was undertaken on the concept of logistics and the supply chain and how the concept of outsourcing has influenced this concept. The literature presented the following results: ~ Logistics is often perceived as non-core business function to a company and hence suitable as an outsourcing option. ~ Outsourcing of the logistics function should be a strategic decision that offers both a reduction in costs as well as improvements in sales revenue and customer service. ~ Outsourcing is able to contribute value for a company through reduced cost and increased revenues as well as improved service levels due to the specialist nature of the outsourcing partner. ~ Some competitive advantage is possible when choosing a 3PLl4PL to operate your logistics function. ~ The 3PL industry is currently in a state of transition, with many small 3PL's consolidating their business efforts to form Lead Logistics Provider companies. An empirical research on the South African perception of the 3PLl4PL industry was then conducted using a structured questionnaire. The results of the questionnaire providing an answer on the state of the 3PLl4PL industry in South Africa along with comments on how successful implementation differed from the failures. From the literature review and the empirical research it was possible to establish recommendation on how to establish a successful outsourcing partnership with a 3PLl4PL, as well as a tool was developed to aid those companies that currently experience problems with their outsourcing partnership. While the outsourcing process is unique to every situation the guidelines offer a generic approach that prevents the prospective outsourcing company from falling into common pitfalls that often lead to failure of the partnership. / Thesis (M.B.A.)--North-West University, Vaal Triangle Campus, 2004.

<p>A payment scheme specifies when payments are made between firms in a supply chain. It has direct implications on how supply chain inventory is financed and managed. Longer supply chains due to globalization and the recent credit crisis have increased the pressure to make financing the supply chain more efficient. It was recently reported that 81% of UK firms say that market conditions have brought procurement and finance strategies in closer alignment. Meanwhile, information technology platform advancements provide opportunity for increased variety of payment schemes. It is therefore important to understand how different payment schemes should be captured in inventory decisions. This dissertation examines the impact of supply chain finance (the set of financial payment transactions that are triggered by supply chain events) on inventory management from both normative and behavioral perspectives. </p><p>We seek to address the following questions. From a normative perspective: How does the optimal inventory policy depend on the supply chain financing structure? What is the right inventory financing scheme for a supply chain? From a behavioral perspective: How do real managers psychologically process payments when making inventory decisions, and how are they affected by the supply chain financing scheme? The results are reported in three chapters, described below.</p><p>In the first chapter, "Payment schemes and the financed inventory," we present a model of payment schemes in an echelon supply chain. A payment scheme specifies when payments are made between firms. Standard inventory decision models make strict assumptions about the payment scheme in order to avoid explicitly tracking financial flows. These assumptions, however, often do not hold in practice. We show that these assumptions can be relaxed. In particular, we introduce a model that allows us to track the financial flow of inventory models depending on the inventory policy and the payment scheme. We also define two new measures - financed inventory and margin backorders. These new measures allow us to leverage the structure of the payment scheme to define an equivalent problem that does not have to explicitly track financial flows. We apply this method to the base stock model and economic order quantity model to demonstrate the sensitivity of the optimal inventory policy to the payment scheme. Our results provide simple closed-form formulas for inventory managers and also sheds light on what is the right payment scheme for a supply chain.</p><p>The second chapter, "The effect of payment schemes on inventory decisions: The role of mental accounting," focuses on managerial behavior: how do manager's mentally process and evaluate payments when making an inventory decision? Keeping the net profit structure constant, we study how the payment scheme affects inventory decisions in the newsvendor problem. Specifically, we examine three payment schemes which can be interpreted as the inventory order being financed 1) by the newsvendor herself, 2) by the supplier, and 3) by the customer. We find in laboratory experiments that the order quantities may be higher or lower than the expected profit-maximizing solution depending on the payment scheme. Specifically, the order quantity under newsvendor own financing is greater than that under supplier financing, which is, in turn, greater than the order quantity under customer financing. This observed behavior biases orders in the opposite direction as what a regular or hyperbolic time-discounted utility model would predict, and cannot be explained by loss aversion models. Instead, the findings are consistent with a model that underweights the order-time payments, which is consistent with the "prospective accounting" assumption in the mental accounting literature. A second study shows the results hold even if all actual payments are conducted at the same time, suggesting that the framing of the payment scheme is sufficient to induce mental accounting of payments at different times. We further validate the robustness of our model under different profit-margin conditions. Our findings contribute to the understanding of the psychological processes involved in newsvendor decisions and have implications for supply chain financing practices and supply chain contract design.</p><p>The third chapter, "Reference prices and transaction utility in inventory decisions," studies another aspect of mental accounting in inventory decisions - the phenomenon that individuals often view a price as relative to other prices when making an evaluation. We present a descriptive model of the effects of reference prices and transaction utility in a newsvendor setting. The model predicts that an individual's order is irrationally increasing in past purchasing costs, decreasing in past selling prices, and decreasing in the proportion of high profit margin to low profit margin products in the decision portfolio. Three laboratory experiments support the model's predictions. These results suggest that managerial supervision and/or intervention are most valuable after a sudden increase or decrease in the cost or price of a product, or for a product that differs significantly in profit margin from other products in the category. We further extend the study to a supply chain setting. We show analytically that the supplier's optimal wholesale price is lower when the newsvendor is subject to reference effects compared to when the newsvendor is rational, and that the supplier's optimal retail price may be higher or lower depending on whether the reference effect is stronger for the newsvendor or for customers. Finally, we show that supply chains may suffer from a behavioral inefficiency we call a behavioral price whip: an increase in the transfer price between two nodes may influence the upstream node to order more than is rational while the downstream node demands less than is rational. These results suggest that suppliers should carefully evaluate the reference effect on both customers and retailers, and that everyday low pricing has a behavioral benefit over high-low pricing.</p> / Dissertation