OEM's sourcing strategy for quality in outsourcing
DOI:
Author:
Affiliation:

Clc Number:

F253

Fund Project:

  • Article
  • |
  • Figures
  • |
  • Metrics
  • |
  • Reference
  • |
  • Related
  • |
  • Cited by
  • |
  • Materials
  • |
  • Comments
    Abstract:

    Supplier efforts regarding product quality is an important issue in outsourcing and plays a critical role in a manufacturer’s choice of sourcing strategy. Considering a manufacturer that wants to outsource the manufacturing of two substitute products to external suppliers,the paper studies the strategic interactions under two sourcing strategies: single and dual sourcing. A four-stage non-cooperative game model is established to describe each member's decisions.Four decision scenarios are proposed: single sourcing with and without sharing of the manufacturer's quality investment,and dual sourcing when suppliers cooperate or do not cooperate in quality decisions.An analytical equilibrium solution is analyzed for each decision scenario.By comparing each pair of equilibrium profiles,it is found that an appropriate proportion of quality investment sharing by the manufacturer causes a cooperating strategy with a single supplier to be the dominant strategy.When the manufacturer does not want to share or does not want to share a relatively large portion of its quality investment,it will always prefer to develop two competing suppliers when the cost of dual sourcing is sufficiently low.Moreover,the case where the manufacturer partially shares the suppliers'quality investment for the dual sourcing strategy is also investigated.It is found that the strategy could be the dominate one when the sharing portion and sourcing cost are sufficiently small.However,dual sourcing can be extremely risky for the manufacturer as the suppliers could provide a relatively low product quality by cooperating in the quality decision.

    Reference
    Related
    Cited by
Get Citation
Share
Article Metrics
  • Abstract:
  • PDF:
  • HTML:
  • Cited by:
History
  • Received:
  • Revised:
  • Adopted:
  • Online: October 25,2021
  • Published:
You are the th visitor Address:Room 908, Building A, 25th Teaching Building, Tianjin University, 92 Weijin Road, Nankai District, Tianjin Postcode:300072
Telephone:022-27403197 Email:jmsc@tju.edu.cn