1. A contract portfolio perspective on the role of customer order lead times in demand fulfilment processes with supply shortage
- Author
-
Renzo Akkerman, Alexander Seitz, and Martin Grunow
- Subjects
allocation planning ,customer segmentation ,Forecast accuracy ,contracting ,Customer order ,Strategy and Management ,Perspective (graphical) ,Economic shortage ,WASS ,Management Science and Operations Research ,Industrial and Manufacturing Engineering ,Operationele Research en Logistiek ,Lead (geology) ,Market segmentation ,order promising ,Portfolio ,Business ,advance demand information ,Operations Research and Logistics ,Industrial organization - Abstract
When demands exceed capacities, suppliers allocate available supply to customers based on customer importance and advance demand information. The accuracy of advance demand information interacts with the length of customer order lead times and influences overall customer service levels. In this paper, we analyse industrial contract portfolios with customer-specific terms in order to derive insights for contract portfolio management and the design of demand fulfilment processes. For this purpose, we develop a framework for analysis of contract portfolios capturing the dynamics of industrial planning processes. The framework is applied to portfolios from the semiconductor sector. Our numerical analysis shows that, in order to improve service levels, demand fulfilment processes and contract portfolio management must especially take into account the length of order lead times and the accuracy of advance demand information. Even though suppliers often prefer long order lead times, our analysis shows that demand fulfilment performance is not primarily determined by the absolute length of the order lead times but by the presence of a negative correlation with the accuracy of advance demand information in the entire contract portfolio. Consequently, these factors require increased attention in the management of contract portfolios and in the negotiation of individual contracts.
- Published
- 2022