Quality Management in Multi-Level Supply Chains with Outsourced Manufacturing

• 成果类型: Article
• 署名作者: Dong, Yan; Xu, Kefeng; Xu, Yi; Wan, Xiang
• 署名单位: University of South Carolina System; University of South Carolina Columbia; University of Texas System; University of Texas at San Antonio; University System of Maryland; University of Maryland College Park; University System of Ohio; Ohio State University
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12428
• 发表日期: 2016
• 页码: 290-305
• 关键词: quality management; Inspection; external failure; supply chain; Outsourcing; moral hazard; accounting and operations interface

摘要

Outsourcing stretches supply chains longer with added contract manufacturers responsible for the manufacturing of parts and final products. Should a firm change its quality management approach as its supply chain becomes longer with outsourced manufacturing? This paper studies a brand owner's optimal choice between two commonly used quality management approaches: an inspection-based approach and an external failure-based approach, in two supply chains - a dyadic supply chain and a multi-level supply chain where the brand owner outsources manufacturing to an independent contract manufacturer. Our study finds that the brand owner's optimal choice between the two quality management approaches could be opposite in the two supply chains. Specifically, we show that if agency costs exist between the contract manufacturer and the brand owner, the brand owner may prefer an inspection-based approach in the multi-level supply chain in contrast to preferring an external failure-based approach in the dyadic supply chain. In particular, inspections can be effective for the brand owner to limit the manufacturer's profit by excluding defective finished products and components, which in turn reduce agency costs in the multi-level supply chain. Hence, the efficiency of an inspection-based approach relative to an external failure-based approach can be higher in the multi-level supply chain as compared to the dyadic one. Our findings suggest that firms should adjust to changes in supply chain structures and re-evaluate the efficiencies of different quality management approaches accordingly.