We study the optimal way to procure components of two competing OEMs that rely on a joint contract manufacturer to produce two partially substitutable products. The contract manufacturer, in turn, needs to procure its components from a supplier. We investigate whether the OEMs should delegate component procurement to the contract manufacturer (indirect procurement) or control it (direct procurement) when the contract manufacturer can strategically implement information firewall to protect its contracting terms with these OEMs. We provide theoretical support to explain different procurement strategies adopted by OEMs to procure components in these three-tier supply chains. We uncover the crucial role of information firewall.
Published in: 6th Asia Pacific International Conference on Industrial Engineering and Operations Management, Bali, Indonesia
Publisher: IEOM Society International
Date of Conference: August 5
-7
, 2025
ISBN: 979-8-3507-4447-7
ISSN/E-ISSN: 2169-8767