CONCLUSION
Prior research finds that supplier reliability comprises several aspects of performance, including a supplier’s consistency in providing product as well as a supplier’s ability to recover from a stockout. Nonetheless, common inventory service level metrics do not capture these aspects of service. We propose a stylized model of supplier performance that incorporates consistency and recovery. In a retail supply chain context, we illustrate how to estimate consistency and recovery using data from suppliers in two distinct industries. We observe that suppliers to retailers exhibit marked differences across their ability to consistently deliver a product and their ability to recover from a stockout. The differences in the values of consistency and recovery within both suppliers support prior arguments in the literature that consistency and recovery represent distinct facets of supplier performance that supply chain parties should monitor and manage.
Based on these results, we model a retailer ordering from suppliers that have differing values of consistency and recovery. In keeping with practice, the retailer does not know the true service level of its suppliers but must instead develop beliefs using each supplier’s performance. Therefore, the retailer faces uncertainty about both demand and the suppliers’ service levels. The model shows that suppliers that appear similar based on common inventory service level metrics may receive very different orders from retailers due to contrasts in consistency and recovery. This suggests that suppliers that perform similarly according to traditional metrics could earn different market shares among their retailer customers based on their consistency and recovery capabilities