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Sourcing for Quality: Cooperating with a Single Supplier or Developing Two Competing Suppliers?
Author
Source
Mathematical Problems in Engineering
Issue
Vol. 2016, Issue 2016 (31 Dec. 2016), pp.1-13, 13 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2016-05-19
Country of Publication
Egypt
No. of Pages
13
Main Subjects
Abstract EN
Supplier efforts regarding product quality are an important issue in outsourcing and play a critical role in a manufacturer’s choice of sourcing strategy.
Consider a manufacturer that wants to outsource the manufacturing of two substitute products to external suppliers.
This paper studies the strategic interactions under two sourcing strategies: single and dual sourcing.
A four-stage noncooperative game model is established to describe each member’s decisions.
We further propose four decision scenarios: single sourcing with and without manufacturer quality investment sharing and dual sourcing when suppliers cooperate or do not cooperate on quality decisions.
By the backward induction approach, we obtain analytical equilibrium solutions for each decision scenario.
By comparing each pair of equilibrium profiles, we find that an appropriate proportion of quality investment sharing by the manufacturer can enable 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 supplier’s quality investment, it will always prefer to develop two competing suppliers when the cost of dual sourcing is sufficiently low.
However, dual sourcing can be extremely risky for the manufacturer because the suppliers could provide a relatively low product quality level by cooperating on the quality decision to extract the manufacturer’s profit.
American Psychological Association (APA)
Chen, Jingxian. 2016. Sourcing for Quality: Cooperating with a Single Supplier or Developing Two Competing Suppliers?. Mathematical Problems in Engineering،Vol. 2016, no. 2016, pp.1-13.
https://search.emarefa.net/detail/BIM-1111970
Modern Language Association (MLA)
Chen, Jingxian. Sourcing for Quality: Cooperating with a Single Supplier or Developing Two Competing Suppliers?. Mathematical Problems in Engineering No. 2016 (2016), pp.1-13.
https://search.emarefa.net/detail/BIM-1111970
American Medical Association (AMA)
Chen, Jingxian. Sourcing for Quality: Cooperating with a Single Supplier or Developing Two Competing Suppliers?. Mathematical Problems in Engineering. 2016. Vol. 2016, no. 2016, pp.1-13.
https://search.emarefa.net/detail/BIM-1111970
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1111970