SCM 355 Important Concepts Chapter 14

SCM 355 Important Concepts Chapter 14 - SCM 355 Important...

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SCM 355 Important Concepts Chapter 14 (Contract Management) Types of Contracts (Exhibit 14.1 Risk) Fixed- Price Contracts Firm fixed price Escalation-de-escalation Predetermination Incentive Cost-based Contracts Cost plus incentive fee Cost-sharing Time and material Cost plus fixed-fee Considerations When Selecting Contract Types (Exhibit 14.2) Component market uncertainty Long-term agreements Degree of trust between buyer and seller Process or technology uncertainty Supplier’s ability to impact costs Total dollar value of purchase Long-term Contracts Benefits Assurance of supply Access to technology Access to cost/price information Volume leverage Supplier receives better information for planning Risks Supplier opportunism Selecting the wrong supplier Supplier volume uncertainty Supplier forgoes other business Buyer is unreasonable Contingency elements of long-term contracts Initial price Price-adjustment mechanisms Supplier performance improvements Evergreen, penalty and escape clauses
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SCM 355 Important Concepts Chapter 14 - SCM 355 Important...

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