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Supply chain sorcery: A practical approach to measure and demystify performance-based contracts

Author

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  • Nowicki, David R.
  • Dickens, John M.
  • Randall, Wesley

Abstract

•We develop an empirical framework linking contract structure, reliability investment, and spare-parts demand in repairable systems.•Using 58 months of component-level data, we estimate demand trajectories under a fixed-price PBC.•Reliability improvements are not uniform but concentrate in components with high failure frequency and high unit cost.•Results suggest that demand reflects reliability investment decisions rather than an exogenous input under PBC.•Findings highlight how contract design influences resource allocation and lifecycle cost outcomes.

Suggested Citation

  • Nowicki, David R. & Dickens, John M. & Randall, Wesley, 2026. "Supply chain sorcery: A practical approach to measure and demystify performance-based contracts," International Journal of Production Economics, Elsevier, vol. 299(C).
    • Handle: RePEc:eee:proeco:v:299:y:2026:i:c:s0925527326002070
    DOI: 10.1016/j.ijpe.2026.110116
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