To improve overall profits, the supplier must design a contract that requires the buyer to share in some of the supplier's demand uncertainty. True or False?
Understand the Problem
The question explores contract design between a supplier and a buyer, specifically how contracts can be structured to share demand uncertainty and improve overall profits for the supplier. The problem requires us to evaluate the statement about whether a contract requiring the buyer to share in the supplier's demand uncertainty is necessary to improve the profitability of the supplier.
Answer
True
True. To improve overall profits, the supplier should design a contract that requires the buyer to share in some of the supplier's demand uncertainty. This encourages collaboration and optimizes the supply chain.
Answer for screen readers
True. To improve overall profits, the supplier should design a contract that requires the buyer to share in some of the supplier's demand uncertainty. This encourages collaboration and optimizes the supply chain.
More Information
Sharing risk and reward in the supply chain can lead to increased profits for both the buyer and the supplier, creating outcomes that benefit the entire supply chain.
Tips
Some might think the supplier should bear all demand uncertainty, but sharing it can lead to more efficient and profitable supply chain management.
Sources
- Solved To improve overall profits, the supplier must design - Chegg - chegg.com
- print quiz 1 15 .docx - Search Chapter 15 Sourcing... - coursehero.com
- Optimizing Profitability in Seasonal Demand: Pricing and - coursesidekick.com
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