Vendor Performance and Alternative Manufacturing Environments*

Abstract

Today, many American firms are demanding a high level of performance from their major suppliers while at the same time reducing the number of them. Vendor performance is an important aspect of maintaining low production costs and high product quality. In this study, we examine the effects of poor vendor quality and vendor lead time uncertainty in a variety of manufacturing environments using a comprehensive simulation model. The results indicate that the effect of poor vendor performance on various manufacturing firms depends on the number of stocking points and the degree of component commonality. Moreover, disruption of the manufacturing system caused by poor vendor performance can be manifested in higher levels of inventory and order backlogs. We introduce the concept of supplyside uncertainty, as it relates to component‐part commonality, to demonstrate that in certain environments commonality reduces order backlogs but increases total inventories and creates an environment that is very sensitive to vendor quality problems. Finally, several conjectures are posited for future research.

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