IDEAS home Printed from https://ideas.repec.org/p/ecl/illbus/06-0102.html
   My bibliography  Save this paper

Collaborative Planning, Forecasting, and Replenishment (CPFR) as a Relational Contract: An Incomplete Contracting Perspective

Author

Listed:
  • Kim, Sung Min

    (Cleveland State U)

  • Mahoney, Joseph T.

    (U of Illinois at Urbana-Champaign)

Abstract

This paper analyzes Collaborative Planning, Forecasting, and Replenishment (CPFR) from an incomplete contracting perspective. In the absence of economic incentive problems, CPFR enables trading partners to improve operational efficiency through a structured process of sharing and utilizing information across firm-level boundaries. From the review of the incomplete contracts literature and a case study of CPFR arrangement, it is proposed that this IT-supported vertical arrangement also becomes the preferred governance mode as a relational contract. With efficient coordination and enhanced economic incentives for mutual commitment, CPFR allows contracting parties to avoid the difficulties of formal contracting while realizing the benefits that would be anticipated from vertical financial ownership.

Suggested Citation

  • Kim, Sung Min & Mahoney, Joseph T., 2006. "Collaborative Planning, Forecasting, and Replenishment (CPFR) as a Relational Contract: An Incomplete Contracting Perspective," Working Papers 06-0102, University of Illinois at Urbana-Champaign, College of Business.
    • Handle: RePEc:ecl:illbus:06-0102
    as

    Download full text from publisher

    File URL: http://www.business.illinois.edu/Working_Papers/papers/06-0102.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gérard P. Cachon & Martin A. Lariviere, 2001. "Contracting to Assure Supply: How to Share Demand Forecasts in a Supply Chain," Management Science, INFORMS, vol. 47(5), pages 629-646, May.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Erik Brynjolfsson, 1994. "Information Assets, Technology and Organization," Management Science, INFORMS, vol. 40(12), pages 1645-1662, December.
    4. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    5. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    6. Yossi Aviv, 2002. "Gaining Benefits from Joint Forecasting and Replenishment Processes: The Case of Auto-Correlated Demand," Manufacturing & Service Operations Management, INFORMS, vol. 4(1), pages 55-74, December.
    7. Seidmann, A. & Sundarajan, A., 1997. "Sharing Logistics Information Across Organizations: Technology, Competition and Contracting," Papers 97-01, Rochester, Business - Operations Management.
    8. Luis Araujo & Anna Dubois & Lars‐Erik Gadde, 2003. "The Multiple Boundaries of the Firm," Journal of Management Studies, Wiley Blackwell, vol. 40(5), pages 1255-1277, July.
    9. Helper, Susan & MacDuffie, John Paul & Sabel, Charles, 2000. "Pragmatic Collaborations: Advancing Knowledge While Controlling Opportunism," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 9(3), pages 443-487, September.
    10. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 387-432.
    11. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    12. Barrie R. Nault, 1998. "Information Technology and Organization Design: Locating Decisions and Information," Management Science, INFORMS, vol. 44(10), pages 1321-1335, October.
    13. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 39-84.
    14. Alchian, Armen A. & Demsetz, Harold, 1973. "The Property Right Paradigm," The Journal of Economic History, Cambridge University Press, vol. 33(1), pages 16-27, March.
    15. Peter Lok & Richard Y. Hung & Paul Walsh & Paul Wang & John Crawford, 2005. "An Integrative Framework for Measuring the Extent to which Organizational Variables Influence the Success of Process Improvement Programmes," Journal of Management Studies, Wiley Blackwell, vol. 42(7), pages 1357-1381, November.
    16. J. Christopher Westland & Theodore H. K. Clark, 1999. "Global Electronic Commerce: Theory and Case Studies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232057, April.
    17. Gérard P. Cachon & Marshall Fisher, 2000. "Supply Chain Inventory Management and the Value of Shared Information," Management Science, INFORMS, vol. 46(8), pages 1032-1048, August.
    18. Carlo Salvato, 2003. "The Role of Micro‐Strategies in the Engineering of Firm Evolution," Journal of Management Studies, Wiley Blackwell, vol. 40(1), pages 83-108, January.
    19. Keith Blois, 2002. "Business To Business Exchanges: A Rich Descriptive Apparatus Derived From Macneil’s and Menger’s Analyses," Journal of Management Studies, Wiley Blackwell, vol. 39(4), pages 523-551, June.
    20. Martha S. Feldman & Anat Rafaeli, 2002. "Organizational Routines as Sources of Connections and Understandings," Journal of Management Studies, Wiley Blackwell, vol. 39(3), pages 309-331, May.
    21. Yossi Aviv, 2001. "The Effect of Collaborative Forecasting on Supply Chain Performance," Management Science, INFORMS, vol. 47(10), pages 1326-1343, October.
    22. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    23. Christian Terwiesch & Z. Justin Ren & Teck H. Ho & Morris A. Cohen, 2005. "An Empirical Analysis of Forecast Sharing in the Semiconductor Equipment Supply Chain," Management Science, INFORMS, vol. 51(2), pages 208-220, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard B. Freeman & Alice O. Nakamura & Leonard I. Nakamura & Marc Prud’homme & Amanda Pyman, 2011. "Wal‐Mart innovation and productivity: a viewpoint," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(2), pages 486-508, May.
    2. Gagalyuk, Taras, 2012. "Goal achievement in supply chain networks: A study of the Ukrainian agri-food business," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 64, number 64.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim, Jongwook & Mahoney, Joseph T., 2008. "A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach," Working Papers 08-0108, University of Illinois at Urbana-Champaign, College of Business.
    2. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    3. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
    4. Kvaløy, Ola, 2008. "Do norms matter for firm boundaries?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(3), pages 969-975, June.
    5. Christian A. Ruzzier, 2009. "Asset Specificity and Vertical Integration: Williamson’s Hypothesis Reconsidered," Harvard Business School Working Papers 09-119, Harvard Business School.
    6. Bernard Baudry & Virgile Chassagnon, 2012. "The vertical network organization as a specific governance structure: what are the challenges for incomplete contracts theories and what are the theoretical implications for the boundaries of the (hub," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(2), pages 285-303, May.
    7. Kim, Sung Min & Mahoney, Joseph T., 2002. "Mutual Commitment to Support Exchange: Specific IT System as a Substitute for Managerial Hierarchy," Working Papers 02-0115, University of Illinois at Urbana-Champaign, College of Business.
    8. Kirsten Foss & Nicolai Foss, 2001. "Assets, Attributes and Ownership," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(1), pages 19-37.
    9. Maloney, Michael T., 2017. "Alchian remembrances," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 561-582.
    10. Tomas Mantecon & Kyojik Song & Haowen Luo, 2016. "The Control and Performance of Joint Ventures," Financial Management, Financial Management Association International, vol. 45(2), pages 431-465, May.
    11. Mahoney, Joseph T., 2012. "Towards a Stakeholder Theory of Strategic Management," Working Papers 12-0100, University of Illinois at Urbana-Champaign, College of Business.
    12. Andrew M. Davis & Stephen Leider, 2018. "Contracts and Capacity Investment in Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 20(3), pages 403-421, July.
    13. Kefeng Xu & Yang Dong & Yu Xia, 2014. "‘Too Little’ or ‘Too Late’: The Timing of Supply Chain Demand Collaboration," Working Papers 0203mss, College of Business, University of Texas at San Antonio.
    14. Rajiv D. Banker & Robert J. Kauffman, 2004. "50th Anniversary Article: The Evolution of Research on Information Systems: A Fiftieth-Year Survey of the Literature in Management Science," Management Science, INFORMS, vol. 50(3), pages 281-298, March.
    15. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    16. Li Chen & Hau L. Lee, 2009. "Information Sharing and Order Variability Control Under a Generalized Demand Model," Management Science, INFORMS, vol. 55(5), pages 781-797, May.
    17. Ilya Segal & Michael D.Whinston, 2012. "Property Rights [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    18. Klein, Peter G. & Mahoney, Joseph T. & McGahan, Anita M. & Pitelis, Christos N., 2012. "Who Is in Charge? A Property Rights Perspective on Stakeholder Governance," Working Papers 12-0102, University of Illinois at Urbana-Champaign, College of Business.
    19. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.
    20. Rainer, Helmut, 2007. "Should we write prenuptial contracts?," European Economic Review, Elsevier, vol. 51(2), pages 337-363, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:illbus:06-0102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cbuiuus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.