Management Science and Information Systems' Seminar

Topic :Managing Suppliers: Joint Audit and Shared Supplier Information

Speaker:Xin Fang

Affiliation:Singapore Management University (SMU)

Time:Monday,13 Oct. 14:00-17:00pm

Location:Room K01 Guanghua Building 2

Abstract:Product safety incidents in recent years have compelled many manufacturers to rethink approaches to manage product quality of their suppliers. In this paper, we investigate two cooperative approaches that are used in practice: auditing common suppliers jointly ("joint audit") and sharing independently collected information with other manufacturers ("shared supplier information"). We develop a model that captures both competitive and cooperative interactions among manufacturers. Our analysis reveals that cooperation does not necessarily improve product safety. The effectiveness of these approaches depends crucially on the externality of product safety of one manufacturer on other manufacturers. Further, we find that, when the risk of product safety failure is high, shared supplier information is more effective than joint audit; otherwise, joint audit is more effective. We also investigate the incentives of competing manufacturers to cooperate by analyzing a cooperative game in partition function form. We find that, in some cases, manufacturers may voluntarily cooperate with each other. This is true even when some manufacturers have better information about product safety than others. However, in other cases, manufacturers with better information need to be compensated properly, and we design an allocation that is ideal for motivating sharing. Since product safety has a significant impact on the well-being of consumers, industries and governments should assess the level of externality and risk of product safety failure in specific market settings in order to design effective and stable cooperative programs.

Bio:

Xin Fang is an assistant professor of Operations Management at Lee Kong Chian School of Business, Singapore Management University. He earned his Ph.D. in Operations Management from Carnegie Mellon University in 2014, and his B.S. in Information Systems from Fudan University in 2008. Xin studies the problems related to competition and coopetition in global supply chain networks. His research applies cooperative game theory, non-cooperative game theory and theory of social and economic networks to the area of supply chain management, especially supply chain security, decentralized distribution systems and supplier management.

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