Channel

Synchronizing Global Supply Chains: Advance Purchase Discounts

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Executive Summary

The authors study economics of sharing demand information between a dual sourcing firm and its network of retailers. The analysis demonstrates that employing advance purchase discount (APD) contracts in these supply chains removes significant impediments to information sharing. Essentially, these contracts synchronize the timeline of dual sourcing firm's decisions with the action of its network retailers. This enables accurate, timely, and self-enforcing information sharing, which reduces the demand supply mismatches, and improve the profitability of each of the agents in the supply chain.

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