Retailers typically carry thousands of products across hundreds of categories. They

often lack the resources to properly manage each and every category offered in the store.

As a result, some retailers may choose to leverage the resources and capabilities of a

lead supplier to help them manage some selected categories. A variety of lead supplier

arrangements can be observed in the retailing industry. They range from advisory arrangements

to delegation arrangements. In this paper, we focus on which and when lead

supplier arrangement is worth the retailer’s trouble. We developed a model based approach

to examine how the degree of retailer’s knowledge about a category moderates the

type of lead supplier arrangement that will benefit the retailer. This paper shows that i)

when the retailer knows that one of the brands is always more sensitive to category management,

advisory is not worth the trouble and only delegation could help the retailer.

Interestingly, we find that the retailer chooses to delegate the category management decision

to a lead supplier only if it expects this supplier to behave opportunistically; ii)

when the retailer does not know which brand is more sensitive to category management

and the difference in sensitivity across brands is always small enough, only advisory could

be worth the trouble; iii) otherwise, both advisory and delegation are equally worth the

trouble.