Waiting or inferring information from competitive contract manufacturer: The role of brand relatedness under disclosure policy

Original equipment manufacturers (OEMs) delegate their production operations to competitive contract manufacturers (CMs) in several industries. However, due to low supply chain transparency, OEMs often lack knowledge of the production information of CMs. Therefore, a series of disclosure policies require that CMs have to disclose updated production information at a certain time spot. As a result of consumers’ perception on related brands, updated production information induces direct (indirect) impacts on the market demand of the CM (OEM), depending on brand relatedness. In this context, we develop a stylized model to investigate the optimal order timing decisions considering production-information-related demand fluctuation in a co-opetitive supply chain. If waiting for information disclosure, the OEM directly observes the updated production information. If not, the OEM can infer this information through the given wholesale price. We find that when brand relatedness is great (low), the OEM would like to order after (before) the disclosure, and the CM prefers to order before (after) the disclosure. Interestingly, our study shows that the OEM may not gain greater information value by waiting, which is contrary to traditional wisdom. Our findings shed light on how firms should manage brand relatedness and choose optimal order timing.