The most important managerial criteria in supply chains are how to manage product, information and cash flows, and how to maximize profits by either increasing the revenue or decreasing the costs. Although the maximum benefits can be achieved if everyone follows the central planner's suggestions; unfortunately, the individual maximum profits may not be guaranteed. Thus, how to regulate the members actions is an interesting topic and a relevant research. Designing contract is a way to control the members actions. We contribute to the research on the quality cost sharing contacts in several dimensions. First, we expand the definition and modeling of quality on a decentralized supply chain to include product failures resulting from design related imperfections. Secondly, we investigate a larger set of external quality cost sharing contracts than what has been studied in the previous literature. We also discuss how to prepare the right contracts in order to avoid the inefficiency of asymmetrical information. Thirdly, we investigate the profitability under the market competition, quality improvement and the external quality cost sharing contract. We find that the optimal quality improvement effort levels are independent from the sale prices and market competition. No matter in the monopoly market or duopoly market, the manufacturer had better adopt the cost sharing contract with the selective root cause analysis in order to increase profits and the competency. Otherwise, his market share is diminished and his profits are eroded.

Last modified

• 08/28/2018

Creator

• Gary Huaite Chao

DOI

• https://doi.org/10.21985/N2XQ6D

Subject

• Industrial Engineering and Management Sciences

Keyword

• quality
• contract
• supply chain
• equilibrium

Date created

• 2007-12-07

Resource type

• Dissertation

Rights statement

• In Copyright