Firms and organization are also pressed for time -- products that are produced and delivered that are spoiled, out-of-date, or out of style and fashion will just waste away on shelves and yield no revenues.
Supply chains today span the globe and provide the infrastructure for the production and delivery of goods and services, with more knowledgeable consumers demanding timely deliveries, despite, paradoxically, the great distances that may be involved. Indeed, delivery times are becoming a strategy, as important as productivity, quality, and even innovation. Smart firms have realized that speed of product delivery is a competitive advantage.
Whether in manufacturing (especially in build-to-order and made-on-demand industries such as certain computers, electronic equipment, specific cars, airplanes, furniture, etc.) or in digitally-based production and delivery (DVDs, online shopping, online content distribution, etc.) speed and consistency of delivery time are two essential components of customer satisfaction, along with price.
Stalk, Jr., in his seminal Harvard Business Review 1988 article, ``Time - The next source of competitive advantage," utilized the term time-based competition, to single out time as the major factor for sustained competitive advantage. Today, time-based competition has emerged as a paradigm for strategizing about and operationalizing supply chain networks in which efficiency and timeliness matter.
In a recent paper, A Supply Chain Network Game Theoretic Framework for Time-Based Competition with Transportation Costs and Product Differentiation, Anna Nagurney and Min Yu, we developed a game theoretical framework for supply chain network time-based competition, which has the following features:
- Firms are assumed to be spatially separated and can compete both on the production side and on the demand side;
- Firms compete in an oligopolistic manner and, hence, influence the prices;
- The time consumption of both production and transportation/shipment supply chain activities is made explicit;
- The strategic variables of the firms are quantity variables and delivery time variables, and
- Consumers at the demand markets for the substitutable, but differentiated, products respond to both the quantities of the products and to their delivery times, as reflected in the prices of the products.
In addition, by capturing the total cost associated with delivery times of each firm, along with their production costs and their transportation costs in their respective objective functions, the marginal cost of time can be quantified in this more general competitive supply chain network framework.
The governing equilibrium concept in our supply chain game theory model was that of Nash equilibrium. By using the theory of variational inequalities we could not only formulate the problem but also effectively and efficiently solve it.
It is not only what you produce and deliver -- knowing how long it will take to get to your customers is information that firms need and that customers respond to, through their wallets.
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