Penalty and reward contracts between a manufacturer and its logistics service provider

Contracts are used to coordinate disparate but interdependent members of the supply chain. Conflicting objectives of these members and lack of coordination among the members lead to inefficiencies in matching supply with demand. This study reviews different types of contracts and proposes a methodology to be used by companies for analyzing coordinating contracts with their business partners. Efficiency of the contract is determined by comparing the performance of independent companies under the contract to the supply chain performance under the central decision maker assumption. We propose a penalty and reward contract between a manufacturer and its logistics service provider that distributes the manufacturer’s products on its retail network. The proposed contract analysis methodology is empirically tested with transportation data of a consumer durable goods company (CDG) and its logistics service provider (LSP). The results of this case study suggest a penalty and reward contract between the CDG and its LSP that improves not only the individual firm’s objective functions but also the supply chain costs. Compared to the existing situation, the coordination efficiency of the penalty and reward contract is 96.1 %, proving that optimizing contract parameters improves coordination and leads to higher efficiencies

Oil Service Contracts - New Incentive Schemes to Promote Drilling Efficiency

,Oil

Regulatory tradeoffs in designing concession contracts for infrastructure networks

Network activities typically involve collecting a good or service (such as electric utilities, phone services, and rail transportation) from many producers or distributing them to many users. Producers and users are often widely scattered, geographically. Close financial integration of networks is justified on the basis of economies of scope and scale and the benefits from pooling and coordinating. In many countries, network operators are completely integrated publicly-owned firms (private firms being deemed insufficiently efficient or equitable). Challengers of this practice contend that the inefficiency resulting from lack of competition outweighs the gain from economic integration. With reform, some competitive mechanisms can be introduced even when monopoly seems the best option for delivering a service. But conflicts between policymakers'objectives -including efficiency, equity, speed, speed of reform, and signaling- influence the design of concession contracts for infrastructure network services (including communications and transportation services). Competition begins with the unbundling of various stages of delivery. Then competitive bidding is popular, with the public authority keeping property rights on productive assets but conceding their operation to a private firm. The winner gets the right to maximize profits, within limits (having to provide universal services, for example, and avoid price discrimination). In liberalizing the delivery of a service, policymakers must consider not only efficiency but also social and fiscal feasibility. The authors discuss how relevant information asymmetry is in contract design and the award and regulatory processes. They also discuss how to design pricing to accommodate the obligation to provide universal service. To illustrate, they describe Argentina's experiment in liberalization, which is increasingly viewed as a model for changing private sector and government involvement in infrastructure services. Beginning in 1989, Argentina began privatizing utilities and transport services, because the government had decided that it could no longer afford to subsidize those services or finance the investments needed for their effective operation. To introduce competition, the government unbundled services and introduced competitive bidding. It also created sector-specific regulatory agencies to protect consumers from private monopolies and to protect the private concessionaires from government micromanagement. Making concession-based reform and contracted-based regulation of private monopolists sustainable will require strengthening regulatory agencies, clarifying their terms of reference and accountability, and better separating the responsibilities of sector ministers and regulators.Health Economics&Finance,Environmental Economics&Policies,Economic Theory&Research,Labor Policies,International Terrorism&Counterterrorism,Environmental Economics&Policies,Health Economics&Finance,Education for the Knowledge Economy,Knowledge Economy,Economic Theory&Research

Promising Payment Reform: Risk-Sharing With Accountable Care Organizations

Describes the implementation of shared payer-provider risk payment models at eight private accountable care organizations. Analyzes challenges for providers, purchasers, and payers, including securing the infrastructure for successful risk management

Carrots, sticks, and the multiplication effect

Although a punishment can be applied only once, the threat to punish (also referred to as stick) can be reiterated several times, because when parties obey, the punishment is not applied and thus the threat can be repeated. The same is not possible with promises to reward (also known as carrots), since they need to be carried on every time a party complies, and hence at each round a new reward is needed. We show that the multipliability of sticks has pervasive consequences in economics and law and provides a unified explanation for seemingly unrelated phenomena such as the dynamics of riots and revolutions, the divide-and-conquer strategy, comparative negligence, the anticommons problem, the use of property rules in markets, the most-favored nation clause, legal restrictions on penalties in employment contracts, and legal aid

A framework for the design and analysis of incentive systems for food safety control in supply chains

Since 2005 the EU food industry has primary legal responsibility for food safety control. This requires new responsibilities and relationships between government and industry, and between companies. This research presents a framework for incentive systems for food safety control in supply chains. It emphasizes key elements of food safety control from multiple perspectives and provides insights for the design and analysis of incentive systems for food safety control. An incentive system combines inter-company incentive mechanisms with intra-company decision making processes to control a hazard within the legal environment. Incentive mechanisms, which consist of a performance measure and a performance reward, induce companies to use control measures. The framework can be used to analyze the effectiveness and efficiency of alternative incentive systems in which companies have to cooperate with partners from other stages of the supply chain.Incentive mechanism, food safety, supply chain control., Agricultural and Food Policy,

Incentive contracting - An annotated and classified modern bibliography

Incentive contracts bibliograph

Outsourcing information systems: Drawing lessons from a banking case study

Financial and costs benefits are often put forward as the reasons why organisations decide to outsource. Emerging patterns and trends indicate that today’s outsourcing decisions are often motivated by factors other than cost. Thus, the decision-making process is more complex than it may at first appear. This paper presents findings from a case study from an organisation in the UK banking sector that was motivated to outsource aspects of its information technology/information system (IT/IS). The underlying motives and decision-making process that influenced the bank outsource its IT/IS are presented and discussed. Findings from the case study suggest political perspectives, as well as human and organisational issues influenced the bank’s strategic decision-making to outsource certain aspects of its business. An examination of the case study findings suggests that cost alone is not always responsible for decisions to outsource, as it was found the bank’s outsourcing decision was driven by a series of complex, interrelated motives in a bid to reduce the risks and uncertainties of managing its own technology. Considering the complex nature of the outsourcing process a frame of reference that can be used to assist managers with their decision to outsource IT/IS is propagated. The case study is used to present an organisation’s experiences as to how and why it decided to outsource its IS and thus offers a learning opportunity for other organisations facing similar difficulties. In addition, the case study findings highlight the need to focus greater attention on discriminating between the short and long-term consequences of IT/IS decision-makin