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After-sales service competition in a supply chain: Does uncertainty affect the conflict between profit maximization and customer satisfaction?

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  • Kurata, Hisashi
  • Nam, Seong-Hyun

Abstract

After-sales services are a key strategic tool in the durable consumer product market. They allow a manufacturer and a retailer to capture more sales and profit. Less obvious, however, is how the uncertainty of the customer's needs for after-sales services influences after-sales service decisions. As an extension of Kurata and Nam's 2010 (International Journal of Production Economics 127 (1), 136–146) work, in this paper we explore the effect of uncertainty on after-sales service decisions by comparing several information structures in a two-stage supply chain. The model presented in this paper demonstrates that uncertainty may temporally alleviate the discrepancy between customers’ optimal service level and a firm's service decisions based on maximizing profits (referred to here as accidental outperformance). However, ultimately, uncertainty will never improve supply chain performance. We determine probabilities that such accidental outperformance may mislead the firm into making erroneous after-sales service decisions due to misunderstandings regarding uncertainty. In addition, our analysis shows that a firm's effort to provide efficient service operations will increase the chance of accidental outperformance. Based on the analytical results, we also provide several practical insights for business.

Suggested Citation

  • Kurata, Hisashi & Nam, Seong-Hyun, 2013. "After-sales service competition in a supply chain: Does uncertainty affect the conflict between profit maximization and customer satisfaction?," International Journal of Production Economics, Elsevier, vol. 144(1), pages 268-280.
    • Handle: RePEc:eee:proeco:v:144:y:2013:i:1:p:268-280
    DOI: 10.1016/j.ijpe.2013.02.014
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    References listed on IDEAS

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    4. Ren, Ting-hai & Zeng, Neng-min & Wang, Da-fei & Yuan, Kai-fu, 2023. "Authorization or encroachment: Effects of channel encroachment on decisions and performance in software service supply chains," International Journal of Production Economics, Elsevier, vol. 257(C).
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    6. Rezapour, Shabnam & Allen, Janet K. & Mistree, Farrokh, 2016. "Reliable flow in forward and after-sales supply chains considering propagated uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 409-436.
    7. Aly Owida & P.J. Byrne & Cathal Heavey & Paul Blake & Khaled S. El-Kilany, 2016. "A simulation based continuous improvement approach for manufacturing based field repair service contracting," International Journal of Production Research, Taylor & Francis Journals, vol. 54(21), pages 6458-6477, November.
    8. Sun, Mingyao & Ng, Chi To & Wu, Feng & Cheng, T.C.E., 2022. "Optimization of after-sales services with spare parts consumption and repairman travel," International Journal of Production Economics, Elsevier, vol. 244(C).
    9. Wang, Yulan & Wallace, Stein W. & Shen, Bin & Choi, Tsan-Ming, 2015. "Service supply chain management: A review of operational models," European Journal of Operational Research, Elsevier, vol. 247(3), pages 685-698.
    10. Yanfei Lan & Zhibing Liu & Baozhuang Niu, 2017. "Pricing and Design of After-Sales Service Contract: The Value of Mining Asymmetric Sales Cost Information," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-25, February.
    11. Seyed Jafar Sadjadi & Hashem Asadi & Ramin Sadeghian & Hadi Sahebi, 2018. "Retailer Stackelberg game in a supply chain with pricing and service decisions and simple price discount contract," PLOS ONE, Public Library of Science, vol. 13(4), pages 1-24, April.
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    15. Kirkizoğlu, Zeynep & Karaer, Özgen, 2022. "After-sales service and warranty decisions of a durable goods manufacturer," Omega, Elsevier, vol. 113(C).

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