Managing High-Tech Capacity via Reservation Contracts

An U.S.Telecommunications Component-Manufacturer

High-Tech Manufacturing Supply Chain

Some Background

High-Tech Supply Chain Building Blocks

Capacity Reservation:
Settings and Assumptions (Erkoc and Wu, 2002a)

Product Life-Cycle

Related Literature

Integrated Channel

Delegation of Control in the Supply Chain

Double Marginalization- suboptimal

Reservation Contract with Deductible Fee

The Sequence of Events

Supplier’s Capacity Decision

Buyer’s Profit

Buyer’s Incentive to Reserve

Supplier’s Profit

The Supplier’s Faces Three Profit Scenarios in sequence as the Buyer’s Margin Decreases

Impact of Market Size and Variability:
Shifted Family Distributions

Impact of Market Size and Variability:
Scaled Family Distributions

System Optimality and Reservations

Capacity Reservation with Partially Deductible Fees

Cost-Sharing Contracts: Capacity Options

Capacity Reservation with Buyer Competition
(Erkoc and Wu, 2002b)

Integrated Channel

Fixed Capacity Reservation Game (FCR)

Capacity Allocation

Variable Capacity Reservation (VCR) Game

Game within a Game:FCR or VCR?

Supplier’s Profit

Supplier’s First Stage Model

The N-Buyer Case

Conclusions

Future Considerations

Buyer’s Profit and Equilibrium

The Uplifting Contract (Spot Market Pricing)