Research On Manufacturer's Purchasing Decision Based On Quality Incentive In Outsourcing

Outsourcing has become a characteristic of supply chain due to many advantages such as lowering costs,reducing investment,improving capacity and promoting core competitiveness.Accordingly,it has developed rapidly in the commercial practice of many high-tech companies.However,in some industries such as automobile manufacturing,medical devices,and high-tech electronics,owing to the lack of quality control by manufacturers,suppliers have little motivation to invest in quality,which ultimately leads to poor product or service quality.Consequently,it will bring business risk to manufactures.The main motivation for outsourcing is to achieve a competitive cost position and quality level.Therefore,how to encourage suppliers to improve quality is crucial for strategic outsourcing.This paper,on the one hand,attempts to propose a vertical quality cooperation strategy.On the other hand,this article studies the situation in which manufacturers purchase key components of products from two suppliers,which can reduce supply risks and get more negotiation strengthThis paper studies the situation where manufacturers in the outsourcing supply chain outsourcing the production of two alternative products to upstream suppliers Furthermore,four decision making schemes are proposed:whether the manufacturer shares investment for quality in single sourcing,and whether suppliers cooperate to make quality decision in dual sourcing.With the establishment of a four-stage dynamic game model,the supply chain members' decision-making and profit are studied and analyzed.Also the sourcing strategy when the quality level and the manufacturer's profit both are the highest is discussed.By comparing each pair of equilibrium solutions,this paper finds that cooperating with a single supplier and developing two competing suppliers may become the dominant strategy for improving quality level and profitAccording to the research in this paper,vertical quality cooperation can motivate suppliers to improve their quality and achieve coordination for supply chain.At the same time,multiple suppliers can lower supply risks,promote upstream competition,and reduce the inefficiency by output uncertainty.The reasonable proportion of quality investment allocation of company Z can make cooperation with single supplier a dominant strategy.When Company Z does not want to share or share a considerable proportion of its suppliers' quality investments and cost of dual sourcing is low enough,then Company Z prefers to develop two competing suppliers.Since suppliers may cooperate with each other in quality decision-making,and then provide low-quality products,which will eventually have an adverse effect on Z company While suppliers compete with each other,they can achieve the best supply chain quality level and manufacture may maximize profit.Further,this paper studies the application of quality incentives in the supply chain under an outsourcing environment and helps Company Z to implement effective quality incentive schemes in practice.This will promote the improvement of supply chain quality and the selection for the structure of supply chain channel,to achieve coordination for it.