Market growth is an important goal for consumer businesses, often leading to lower marginal cost, higher operational efficiency, and larger assortment size - all of which help achieve dominance over competition. Yet, retailers and manufacturers alike should carefully manage their supply chains to sustain growth in customer base and extract benefits from the associated economies of scale. Inability to supply to the market to meet customer demand might slow down growth. This is particularly relevant for competitive rapidly-growing industries such as consumer electronics where future demand might be driven by current sales, for example, through word of mouth and network externalities (when product value depends on the size of customer base). A firm might be unable to supply to the market if its supply chain is disrupted, that is if it loses a significant portion of its supply due to an unforeseeable event such as a natural disaster. Existing Operations literature tends to study supply chain disruption risk in settings where a disruption only affects the immediate state of a firm, thereby not taking into account its effect on future growth. Even if the market growth is attained, a firm might still encounter various operational hurdles counteracting traditionally known benefits from economies of scale and even leading to diseconomies of scale, when operational efficiency diminishes with growth. While the negative effects due to market growth have been well-covered in economics and service operations, potential operational difficulties in supply chains due to market growth have received less attention. With this in mind, this dissertation explores: 1) how firms should manage supply chain disruption risk when market growth is driven by their ability to supply to the market; and 2) whether market growth can lead to logistical difficulties in e-commerce supply chains that could counteract benefits from economies of scale. Chapter 1 presents a modeling study of an inventory management model under supply chain disruption risk when future demand depends on current sales. While the dependence of demand on sales has been addressed in several streams of Operations literature, to the best of our knowledge, such a setting has not been studied in the disruption literature. Yet, we observe risk mitigation strategies that are quite different from those shown in the literature. For example, there may exist distinct values of probability of disruption at which the order quantity from an unreliable supplier for delivery in a given period increases in the probability of disruption, when the OEM either single or even dual sources from the unreliable and reliable suppliers. We consider a multi-period setting with demand in each period a multiple of sales in the previous period. The OEM can obtain supply from a reliable (not subject to disruption) and unreliable (subject to disruption) supplier. We characterize optimal policies analytically and visualize them with numerical simulations. This study is particularly relevant nowadays as many industries where future demand is driven by sales (e.g., consumer electronics) frequently experience supply disruptions, for example, due to the Covid pandemic. Chapter 2 considers an e-commerce setting and empirically studies the relationship between market growth and quality of service in supply chains. Online retailing, further boosted by the Covid pandemic, is rapidly becoming the dominant way of shopping among customers. One metric for quality of service in e-commerce supply chains is delivery speed - a key competitive advantage. Our research empirically shows that market growthmight lead to logistical difficulties when serving new customers, thereby diminishing the benefits from economies of scale. We use data from the e-commerce platform JD that describes customer transactions and deliveries for a single product category for March 2018. We analyze 214,726 shipments and use several metrics for delivery speed as measures of quality of service. We find that customers who joined the JD platform more recently suffer from slower deliveries compared to legacy customers who have been with JD longer - even though it would seem optimal for JD to provide better service to newer customers to attract and retain them. We expand the base specification with controls for individual warehouses and explore new outcome variables related to the supply chain operational complexity to suggest a mechanism behind this slower service to newer customers. Specifically, our results suggest that as the historical centers of demand exhaust their growth, new customers come from progressively harder-to-reach areas with less developed distribution infrastructure, and the existing supply chain cannot keep up with such geographically dispersed market growth thereby diminishing the overall benefits from economies of scale. Hence, rapidly growing firms that are keen on acquiring and retaining their new customers may want to carefully manage their geographical expansion to avoid potentially high customer churn rate.

Creator

• Glinskiy, Vadim

DOI

• https://doi.org/10.21985/n2-qakq-7c43

Subject

• Operations research

Language

• en

Alternate Identifier

• etdadmin_upload_878312
• http://dissertations.umi.com/northwestern:15922

Date created

• 2022-01-01

Resource type

• Dissertation

Rights statement

• In Copyright