Buyer—supplier contracts

Supplier or Buyer Leadership Contracts Electrical system of a oar Alliance Nokia and Microsoft devlc ing new mobile products... 

Wuyts, S., Geyskens, L (2005). The formation of buyer-supplier relationships Detailed contract drafting and close partner selection. Journal of Marketing, 69(4), 103-117. 

The farmer should keep the distributor/wholesaler informed of production plans, and must give the buyer as much notice as possible of any change in plans. This will provide an opportunity to line up another supplier (Roos, 2002). Some wholesalers offer farmers longterm contracts which guarantee price premium for organic products over several years. 

Marquez, AC, Blanchar C (2004) The procurement of strategic parts. Analysis of contracts with suppliers using a system dynamics simulation model. International Journal of Production Economics 88 (1) 29-49 Mason S (2002) Simulation software buyer s guide. HE Solutions May 45-51 McAfee R, McMillan J (1987) Auctions and Bidding. Journal of Economic Literature 25 699-738... 

Another area to consider in negotiations is tolling arrangements and cost effects on total contract. You need to communicate to all briers that individual prices may vary but overall volume to the preferred supplier is what will really save the compare money. In some cases individual buyers will not be given pricing information. The special pricing obtained from the preferred supplier must not be shopped on the market, especially to non-preferred suppliers. The non-preferred supplier may try to imdercut the preferred supplier. 

The key issue to be managed in such contracts is the agency effect, as described in the earlier section. The agency effect reflects the fact that only the agent (the supplier) knows the true quality, while the principal (the buyer) experiences the cost of the quality. The associated problem then is similar to the unknown supplier capability discussed in the previous section. Similar to the models discussed there, contracts between the buyer and the supplier can include buyer oversight and buyer-recommended processes that involve buyer costs but may affect supplier costs as well. The optimal contract thus has to account for the extent of buyer oversight and its associated impact on the information rents that have to be paid to suppliers. 

But what if there were two suppliers, each competing to win the contract. Suppose the two suppliers have produaion costs of r, and s, with a> 2> s. Consider a system in which the suppliers first compete on wholesale price, and the buyer chooses the appropriate retail price and quantity. F the two suppliers participated in an auction, then the wholesale price charged to the buyer would be Si- This wholesale price is always smaller than the best that can... 

The supply chain literature takes a different perspective on supplier-buyer interaction. The most well known model of pairwise supplier-buyer interaction is in supply chain contracting. The scope of the contract is typically limited to the two agents involved in the negotiation at a particular point in time with the assumption that they have agreed to coordinate via some form of contract. Ca-chon (2002) describes the typical sequence of events as follows the supplier offers the retailer a contract the retailer accepts or rejects the contract assuming the retailer accepts the contract, the retailer submits an order quantity, q. 

Ha, A.Y., Supplier-Buyer Contracting Asymmetric Cost Information And The Cut-Off Level Policy For Buyer Participation, Naval Research Logistics, 48,1 (2001), 41-64. 

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