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Journals(Abstract)
Quality-Reliability Trade-offs in the Sourcing Strategy of Manufacturing Competition Systems
Guo Nian*
School of Digital Economy and Management, Chongqing Polytechnic University of Electronic Technology
Abstract:
High-quality supply sources are typically scarcer and more difficult to access than their low-quality counterparts, yet the literature often overlooks this inherent trade-off be-tween quality and reliability. In this paper, we investigate a sourcing game where competing manufacturing firms may choose among unreliable high-quality sourcing and reliable low-quality sourcing strategies. Focusing on the case of single sourcing, we challenge the conventional wisdom that treats cost as a mere "order qualifier." Instead, we demonstrate that quality is a pivotal determinant in shaping equilibrium sourcing strategies. Furthermore, although the two firms are symmetric, we identify an asymmetric equilibrium when the two supply bases’ quality-cost efficiency is not much better than each other. This is because adopting the same sourcing strategy would intensify competition and decreases both firms’ profits in such situation.
Key Words:
sourcing strategy; quality-reliability trade-offs; competition; game theory