Electronic data interchange: competitive externalities and strategic implementation policies

Article Abstract:

The effect of electronic data interchange (EDI) on the competitive standing of upstream suppliers in a simple two-level hierarchical market structure is examined. It is assumed that the buyer has a linear demand curve while the competing heterogeneous suppliers face an upward-curving marginal cost function. It is shown that suppliers who embrace EDI can create positive externalities for the buyer and negative externalities for competing suppliers. In response, the buyer provides a price premium to EDI-using suppliers and boosts their sales volume and market share. The buyer may even subsidize the suppliers to encourage them to employ EDI if the benefits are huge and suppliers' EDI implementation expenses are substantial. Lastly, it is also revealed that the upstream market has a tendency to be more concentrated due to higher cost differentials.

Research, Competition (Economics), Industrial suppliers, Electronic data interchange, EDI (Electronic data interchange)

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Contracting structures for custom software development: the impacts of informational rents and uncertainty on internal development and outsourcing

Article Abstract:

The factors behind the decision of companies to contract software development projects to either inside or outside developers are evaluated using a model. Internal development is observed to be an accepted practice whenever cost functions between internal and external developers are the same. Uncertainty about the development costs is observed to be a significant variable. However, the selection of internal or external development is not influenced by the uncertainty in system value. The model also highlighted other aspects of custom software development, namely the importance of development incentives, the impact of positive externalities and the proper selection of an appropriate contracting scheme.

Models, Analysis, Software, Product development, Outsourcing, System development, Systems development

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Optimizing processing rates for flexible manufacturing systems

Article Abstract:

Organizations should treat processing rates for flexible manufacturing systems (FMS) as variables. Firms can optimize processing rates by using a queuing network model to identify changes in bottlenecks and lengths of queues when processing rates are changed. An analysis of an FMS with optimal processing rates results in several conclusions, including that the equal utilization of all machines is not usually optimal, an increase in the work-in-process level reduces operating costs but increases lead times, and marginal part production expenses increase dramatically as the upper bound of the feasible range is approached.

Methods, Management, Production control, Production planning, Flexible manufacturing systems

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