Supply chain quality and pricing decisions under multi-manufacturer competition

In today’s global competition, supply chain quality management is the key to a firms’ competitiveness. However, managers find that making sound quality and pricing decisions under a complex multi-echelon in the current competitive electronic commerce environment is daunting and challenging. The purpose of this paper is to examine the optimum quality strategies under different cooperative mechanisms and investigate its effects on channel members’ profits.

This paper is a result of a China-UK collaborative research effort, involving researchers with expertise in information systems, quality management, supply chain management, pricing, and game theory models. The authors consider the quality decisions of a single product in a supply chain system that consists of a supplier and two competing manufacturers. The authors examine the optimum quality strategies under different cooperative mechanisms and investigate its effects on channel members’ profits. A modified Nerlove-Arrow model is employed to investigate the quality levels on goodwill and product sales.

The results reveal that the traditional cooperative program is not very effective in the horizontal competitive market; and each channel member may have a profit improvement when the supplier integrates with a manufacturer.

The authors believe that this paper will contribute to the existing body of knowledge. Moreover, the paper provides insights for managers to better manage their supply chain quality management in an information-centric context.