Authors: Andreas Norrman
Addresses: Department of Industrial Management and Logistics, Lund University, SE-221 00, Lund, Sweden
Abstract: Incentive alignment, and risk and gain sharing, are argued to be key factors for the successful implementation of Supply Chain Management (SCM). Incentive-related issues can be improved by contract based, information-based and trust-based solutions. The focus of this article is on contract mechanisms used in the context of high demand volatility, supply allocation and outsourced supply chains. Two case illustrations from a high-tech industry (Agilent and Hewlett Packard) describe recently implemented risk-sharing contracts, as well as experiences and issues regarding their implementation from a buyers| perspective. Although the work of implementing these more formal contracts is demanding, buyers are pleased with the results and the buyers also report pleased suppliers. In the cases, the main barrier to implementing risk-sharing contracts seems to be the shift in mindset and culture needed internally, especially among purchasers.
Keywords: supply chain risks; risk sharing; incentive alignment; contracts; agency theory; information; trust; supply chain management; SCM; high demand volatility; supply allocation; supply chain outsourcing; high-tech industry; Agilent; Hewlett Packard; procurement management.
International Journal of Procurement Management, 2008 Vol.1 No.4, pp.371 - 393
Published online: 21 May 2008 *Full-text access for editors Access for subscribers Purchase this article Comment on this article