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We study a supply chain in which an original equipment manufacturer (OEM) outsources manufacturing functions to a contract manufacturer (CM) for cost saving. In addition to accepting the OEM’s order, the CM can develop self-branded products and enter the end-market. Because of the OEM’s well-known brand and long-term good reputation, we take the asymmetric customer loyalty into consideration - a fraction of customers are loyal customers (LCs) who only consider buying the product from the OEM, while other customers in the market are non-loyal customers (NCs) who might switch to purchasing the CM’s product because of the lower selling price. We explore whether the CM will enter the end-market and if so, what is the impact of the market entry on the OEM and the entire supply chain. Counterintuitively, we find that there will be no market entry when the CM is relatively strong, i.e., the CM is able to provide self-branded products with relatively high acceptance and the CM has a relatively large bargaining power. In addition, when the NC segment is an important profit source for the OEM, i.e., the NCs’ market size is relatively large and their willingness-to-pay is relatively high, the market entry will not occur, either. The OEM’s profit is always hurt by the CM’s market entry unless the OEM always only sells the product to the LCs, while the supply chain sometimes can get benefit. Through numerical simulations, we reveal the relationships between the profit change of different parties and the key parameters, such as the relative willingness-to-pay and market sizes of two types of customers, the CM’s bargaining power and the acceptance of the CM’s product, when the market entry becomes an available option for the CM. The impact of production cost difference on the market entry decision and profit changes is also analyzed in the extension when producing the OEM’s product is more costly for the CM than producing the self-branded product.

The increasing pressure on manufacturing organizations to produce eco-friendly products has led these organizations to select sustainable contract manufacturers for outsourcing their products. This study aims to develop an approach for selecting a contract manufacturer (CM), having the capability of producing environmentally sustainable automotive products for original equipment manufacturers (OEMs). A framework is proposed to achieve this task. This framework is developed by integrating two multi-criteria decision-making techniques (MCDM), viz. Analytical Hierarchy Process (AHP) and ViseKriterijumska Optimizacija I Kompromisno Resenje (VIKOR). The selection of the CM for producing eco-friendly automotive products is based on certain criteria (i.e., different life cycle stages of products to be considered by CM) and sub-criteria (i.e., various ecodesign practices to be implemented by CM under each life cycle stage of products). A total of 22 sub-criteria are selected on the basis of literature and expert’s opinion from auto industry and academia. The application of the proposed research has been demonstrated through a case study which includes 4 alternative contract manufacturing companies related to automotive products. AHP method has been utilized to assign the weightage to different criteria and sub-criteria, whereas VIKOR approach has been utilized to evaluate the environmental performance of 4 CMs and to select the most efficient one. Results show that “Ensuring easy maintenance and repair,” “Improving durability and higher reliability,” and “Using alternative manufacturing techniques” are the top 3 criteria for the selection of sustainable CM. In addition, CM3 stands out to be the most sustainable among the four alternative CMs because of the ability to consider key environmental criteria especially during the selection of raw materials and manufacturing processes. The outcomes of this research may be utilized by the OEMs to understand the different criteria for selection of a sustainable contract manufacturer. Also, the proposed approach can lead the OEMs to evaluate the environmental performance of different contract manufacturers and to select the best one.

Consider a fashion supply chain comprising a supplier, a contract manufacturer and a fashion brand, we examine the fashion brand’s profit performances when the contract manufacturer is either an OEM (having no design capability) or an ODM (having design capability). Regarding OEM, the fashion brand designs the products, outsources the manufacturing function, and has the option of outsourcing procurement function. Regarding ODM, the fashion brand buys unlabeled products from the ODM, which is charge of designing and manufacturing. In this case, buy-back contract is widely adopted so as to share the risk of demand uncertainty between the ODM and the fashion brand. We solve the wholesale pricing problems via sequential/simultaneous optimization, and derive the buy-back price via generalize Nash bargaining. We find that, fashion brand prefers contracting with an ODM when its bargaining power in buy-back negotiation is larger than a threshold, although the fashion brand’s order size under ODM is always larger than that under OEM. Interestingly, we find that the buy-back price is decreasing in the fashion brand’s bargaining power. We further analyze the supply chain sustainability in both ODM and OEM scenarios, finding that the supply chain might achieve both environmental sustainability and economic sustainability in OEM scenario when the fashion brand’s bargaining power in buy-back negotiation is small.

We consider an original equipment manufacturer (OEM) who has outsourced the production activities to a contract manufacturer (CM). The CM produces for multiple OEMs on the same capacitated production line. The CM requires that all OEMs reserve capacity slots before ordering and responds to these reservations by acceptance or partial rejection, based on allocation rules that are unknown to the OEM. Therefore, the allocated capacity for the OEM is not known in advance, also because the OEM has no information about the reservations of the other OEMs. Based on a real-life situation, we study this problem from the OEM’s perspective who faces stochastic demand and stochastic capacity allocation from the contract manufacturer. We model this problem as a single-item, periodic review inventory system, and we assume linear inventory holding, backorder, and reservation costs. We develop a stochastic dynamic programming model, and we characterize the optimal policy. We conduct a numerical study where we also consider the case that the capacity allocation is dependent on the demand distribution. The results show that the optimal reservation policy is little sensitive to the uncertainty of capacity allocation. In that case, the optimal reservation quantities hardly increase, but the optimal policy suggests increasing the utilization of the allocated capacity. Further, in comparison with a static policy, we show that a dynamic reservation policy is particularly useful when backorder cost and uncertainty are low. Moreover, we show that for the contract manufacturer, to achieve the desired behavior, charging little reservation costs is sufficient.

Product recalls can damage a company’s reputation and its share price. Nevertheless, one of the side effects of increased globalization and outsourcing is a rising number of product recalls. What can we learn from these experiences, and what else needs to be done?

In the competitive global business environment, enterprises should effectively respond to and satisfy customer needs. Outsourcing manufacturing is an effective method of adjusting the flexibility of production capability. To ensure final product quality, evaluating and selecting a contract manufacturer is essential. Process capability indices are extensively adopted in manufacturing to determine whether a process meets capability requirements. This study attempts to determine the score index Ri and then apply it to assess the process performance of contract manufacturer by using the process incapability index Cpp. The formulae for Cpp and Ri are simple to understand and to apply. The procedure developed in this paper is also an easy and convenient tool for practitioners to assess contract manufacturer quality performance and make more reliable decisions regarding contract manufacturer.

In this paper we develop a quadratic programming model for partner selection and planning in integrated supply chain networks embedded with both sell-side and buy-side electronic marketplaces. Such a scenario arises in several practical applications. In particular, we consider a contract manufacturer who procures components from suppliers through a component marketplace and sells its manufactured sub-assemblies to original equipment manufacturers (OEMs), through a sub-assembly marketplace. In these web-enabled supply chains, embedded with upstream and downstream electronic marketplaces, we need methods for online supply-chain partner selection based on pricing and delivery schedules. In this paper, we develop and present such a model that selects partners, synchronizes supply chain activities and optimizes the profit through optimal revenue pricing and cost minimization.

A direct comparison between American pharmaceutical and medical device clinical good manufacturing practices (cGMPs) versus International Standards Organization (ISO) 9002 has been studied via a third party audit of an industrial contract manufacturer by a generic pharmaceutical corporation. To meet future international harmonization needs, the contract manufacturer had set a goal to obtain ISO 9002 approval. As its market for components of medical devices expanded, management soon envisioned expansion into pharmaceutical production.Medical device cGMP regulations were similar to the specifications set by ISO 9002. Pharmaceutical cGMPs were seen as a deviation from the standard operating procedures for ISO 9002.