Abstract
Retailers procure inventory by placing purchase orders (POs) with suppliers. POs specify product price, quantity, quality, delivery times, and other aspects of the fulfillment process, such as carton labeling requirements and packaging formats. When servicing an order, a supplier may fail to meet the fulfillment terms, thus committing a fulfillment error and triggering a chargeback penalty. We collect supplier compliance manuals from 111 retailers to characterize fulfillment errors and chargebacks in practice. The majority of chargeback penalties listed by retailers pertain to execution quality: aspects of the fulfillment process beyond product price, quantity, quality, and delivery time. We use an empirically grounded analytical model in combination with game-theoretic analysis to demonstrate that the chargebacks most commonly used in practice do a poor job coordinating supply chains around execution quality.
Original language | English (US) |
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Pages (from-to) | 31-48 |
Number of pages | 18 |
Journal | Journal of Operations Management |
Volume | 67 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2021 |
Funding
We thank Dan Guide, Suzanne de Treville, Noa Ziv-Zror, Uri Zror, Lynda Gauthier, and Jamie Squires for supporting our research.
Keywords
- Buyer-supplier relationships
- Retail operations
ASJC Scopus subject areas
- Strategy and Management
- Management Science and Operations Research
- Industrial and Manufacturing Engineering