Archive | February 2018

Supply Chain Coordination with Contracts

Today I would like to talk about Supply Chain Coordination with Contracts, a chapter written by Cachon (2003). It has become the standard reference when it comes to teaching some key supply chain models. Coordination between the members of a supply chain is certainly very relevant but also challenging. Because the members of a supply chain are typically concerned with optimizing their own objectives, their actions might not lead to optimal supply chain performance. Therefore, contracts need to be carefully designed. The author “reviews and extends the supply chain literature on the management of incentive conflicts with contracts”. For example, Cachon presents key supply chain models, hereby extending the newsvendor model “by allowing the retailer to choose the retail price in addition to the stocking quantity” and “by allowing the retailer to exert costly effort to increase demand”. Teaching such models can help students to gain the required problem-solving competencies and abstraction capabilities that are needed in today’s business world.

Cachon, G.P. (2003). Supply Chain Coordination with Contracts. Handbooks in Operations Research and Management Science, 11 (Supply Chain Management: Design, Coordination and Operation), 227-339 https://doi.org/10.1016/S0927-0507(03)11006-7

Report Confidence Intervals and Effect Sizes, not p Values!

Several journals have already reacted to the p value debate. For example, an ASQ essay provides suggestions that not only every editor should read. Another example are the policies published by SMJ: SMJ “will no longer accept papers for publication that report or refer to cut-off levels of statistical significance (p-values)”. Instead, “authors should report either standard errors or exact p-values (without asterisks) or both, and should interpret these values appropriately in the text”. “[T]he discussion could report confidence intervals, explain the standard errors and/or the probability of observing the results in the particular sample, and assess the implications for the research questions or hypotheses tested.” SMJ will also require authors to “explicitly discuss and interpret effect sizes of relevant estimated coefficients”. It might well be that we are currently observing the beginning of the end of null-hypothesis statistical tests. And it might only be a matter of time before other journals, also SCM journals, require authors to remove references to statistical significance and statistical hypothesis testing and, ultimately, to remove p values from their manuscripts.

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