Resources customer-level profits

Virtually all published chain-link or cascading models linking vendor resource inputs with customer-level profits share roots in Heskett, et al. s (1994) Service-Profit Chain (SPC). Examples include its derivatives (e.g. Kamakura, Mittal, de Rose, Mazzon, 2002 Love-man, 1998 Soteriou Zenios, 1999), the return-on-quality (ROQ) framework (Rust, Zahorik, Keiningham, 1995), and the general satisfaction-profit chain (Anderson Mittal, 2000). Further, with one exception (Bowman Narayandas, 2004), all are developed in a consumer setting. 

Our example uses the data from Bowman and Narayandas (2004). The customer firms are more than 300 industrial customers of firms that provide metal processing, fabrication, and distribution services. The customer firms are in industries that include manufacturing, construction, transportation, aerospace, and electrical. As a group, these customers use over sixty different vendors. A sponsoring vendor firm provided financial data and details of its efforts at the customer account level, enabling us to link vendor resource commitments to vendor performance and customer profitability. 

The alternative to rule-based models and allocation policy is the use of optimization-based resource allocation models. Such models can explicitly take into account variations in profitability at the customer order level, com-... 

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