A contract that is used to induce performance improvement from a supplier along dimensions,such as lead time,where the benefit of improvement accrues primarily to the buyer,whereas the effort for improvement comes primarily from the supplier is a
A)buyback or returns contract.
B)revenue-sharing contract.
C)quantity flexibility contract.
D)shared savings contract.

Question

Quizplus · Accepted Answer

A shared savings contract is used to improve supplier performance along dimensions where the buyer benefits the most, while the supplier puts in most of the efforts. Under this contract, the buyer and the supplier agree on a baseline level for a certain metric, such as lead time. If the supplier can improve the metric beyond the baseline, the resulting savings are shared between the buyer and the supplier. This type of contract incentivizes the supplier to improve their performance and accomplish the desired improvements.

A Contract That Is Used to Induce Performance Improvement from a Supplier