Supply management under high goal incongruence: An empirical examination of disintermediation in the aerospace supply chain

Aftermarket sales and profits are becoming an increasingly important part of an original equipment manufacturer's (OEM) business model. Because replacement parts often do not require further manufacturing, OEMs act as intermediaries in the aftermarket. As with any intermediary, the OEM must concern itself with suppliers disintermediating its supply chain selling replacement parts directly to the OEM's customers. We frame supply chain disintermediation (SCD) as a principal-agent contracting problem between an OEM buyer and a supplier. Hypotheses relate contract conditions, goal incongruence, supplier capabilities and contract enforcement to SCD. The data are collected from the aerospace industry using a multimethod study, combining an Internet-based survey with archival data. Causal modeling with structural equation modeling (SEM) shows general support for the hypotheses. Particularly, SCD is positively related to buyer-supplier goal incongruence. The agency model offers insights that differ from previous transaction-cost-based models of buyer-supplier relationships. OEM buyers with a lucrative aftermarket should consider aligning goals through incentives rather than relying entirely on economic hostages associated with specific assets.