The impact of supplier reliability tracking on customer demand
Subtitle: model and estimation methodology
By: Nathan Craig, Nicole DeHoratius, Ananth Raman
Contributors: DeHoratius, Nicole; Raman, Ananth; Harvard Business School
Edition: Rev.
Series: Working paper / Harvard Business School -- 11-034; Working paper (Harvard Business School) -- 11-034
Publisher: Harvard Business School
Published: 2011
Place of publication: Boston]
Language: eng
Number of pages: 34
Description: To set service levels, firms must understand how changes in service affect customer demand. Supplier reliability tracking is a process whereby customers use past supplier performance to build beliefs about supplier capabilities and hence about future supplier performance. This paper presents a multi-period model of suppliers selling substitutable products to a customer that engages in supplier reliability tracking. Using this analytical model, we observe how a supplier's service level performance molds a customer's beliefs as well as how a customer's beliefs affect its order quantities. We also provide a method for estimating the impact of changes in supplier performance on customer demand. Using data from Hugo Boss, a manufacturer of branded apparel, we find increases in supplier reliability to be associated with significant increases in orders from Hugo Boss's retailer customers.
Notes: "September 2010, revised July 2011" -- Publisher's website.

"July 12, 2011" -- added t.p.

Includes bibliographical references.