Incorporating Order‐Fulfillment Flexibility in Automotive Supply Chain through Vehicle Trades.

In an automotive supply chain, long production time and demand uncertainty lead to major challenges in meeting customer demand. To respond to these challenges, automotive supply chain incorporates flexibility in the order‐fulfillment process through vehicle trades. This study focuses on a new category of vehicle trades where dealers trade vehicles that are still under production (order‐trades) and in the delivery phase of the order‐fulfillment process (distribution‐trades). Using empirical data in an experimental design setting, order‐ and distribution‐trades are shown to improve flexibility in order fulfillment, with no additional costs for the manufacturer. Different managerial levers such as trade fees and trade caps are evaluated to develop insights for managing vehicle trades. The results show that the involvement of the manufacturer in planning order‐ and distribution‐trades helps in lowering inventory, reducing lost sales, and improving logistics costs for the entire supply chain. [ABSTRACT FROM AUTHOR]