Abstract
In long-term recurring contractual relationships, which are common in the B2B-arena, reputation and trust play a crucial role. This analysis investigates the joint impact of reputation and price-based ranking of suppliers on the material flow in the supply chain. Positive reputation proves to be a key factor in reaching dominating market positions, which illustrates the importance of building brand awareness in all stages of a supply chain. Through our simulation, it will be observed that the ranking of suppliers by reputation-based choice has a stabilizing effect on the material flow in the supply chain. A strong reputation component in the individual choice stimulates the formation of monopolies, while the discount of reputation imposes a countertendency on this effect. The Bullwhip Effect, another phenomenon that carries a countertendency to the reputation-based monopoly effect, is observed to be even stronger for members of tiers with a high fluctuation of order rates.
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Notes
For the purpose of our model, two more agents have been created, one acting as the first supplier and always delivering raw material, and the other acting as the consumer provided with an exogenous demand level
If the estimated stock in the requested delivery period is insufficient to fulfill the order request and the suppliers are unable to deliver on time, the order request will be rejected
In this figure, the factory shows the highest standard deviation, while the retailer shows the smallest standard deviation. Distributors and raw material suppliers are in between these two. The data row marked “Exogenous” depicts the standard deviation of the exogenous orders generated by the consumer
We conducted 50 simulation runs with 5,000 simulated periods each for weightings of reputation toward price between 0.0 and 1.0
The price-to-reputation weighting is set to 0.5
For each setting, we performed 50 simulation runs with 5,000 simulated periods
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Franke, J., Stockheim, T. & König, W. The impact of reputation on supply chains. An analysis of permanent and discounted reputation. ISeB 3, 323–341 (2005). https://doi.org/10.1007/s10257-005-0007-4
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DOI: https://doi.org/10.1007/s10257-005-0007-4