<p style='text-indent:20px;'>In a supply chain with product outsourcing, it is crucial to identify which firm implements corporate social responsibility (CSR) leads to a higher CSR effort level, a higher product quality level, a higher quantity of outsourced products, and higher profits for supply chain members. In response to this question, we consider a decentralized supply chain with an upstream contract manufacturer (CM) and a downstream original equipment manufacturer (OEM). In this relationship, the downstream OEM outsources the product to the upstream CM and determines the quantity, while the upstream CM produces for the downstream OEM and determines the product quality and the wholesale price. Based on the scenario that each supply chain member can respectively implement the CSR effort (i.e., the CM model and the OEM model), we first investigate the impacts of the CSR demand-sensitivity coefficient, the CSR cost-reducing efficiency, and the CSR effort investment efficiency on the operational decisions and on the profits for supply chain members. Second, we compare the equilibrium results between the CM model and the OEM model. Finally, we study supply chain coordination. We find that (1) an increase in the CSR demand-sensitivity coefficient (the CSR cost-reducing efficiency and the CSR effort investment efficiency) is beneficial to the CSR effort level, the product quality level, the quantity of outsourced products, and the profitability for each supply chain member; (2) the CSR effort level is higher in the CM model than that in the OEM model, which in turn leads to a higher product quality level, a higher quantity of outsourced products, and a higher profitability of supply chain members; and (3) the proposed schemes consisting of quantity discount contracts, CSR effort investment cost sharing contracts, and quality investment cost sharing contracts can effectively coordinate the supply chain.</p>
We consider a decentralized supply chain with a downstream manufacturer and an upstream supplier. The upstream supplier sells a product to the manufacturer, who faces a quality and price sensitive demand. The supplier has a chance to invest in both cost reduction and quality improvement of its product. We derive the optimal investment and pricing decisions for the supply chain members. We do so in both the centralized and the decentralized supply chains. We show that the optimal investment and pricing decisions in the decentralized supply chain may deviate from that in the centralized supply chain. We develop a mechanism to coordinate the decentralized supply chain. The developed mechanism contains four policies: wholesale price, sharing of revenue, sharing of cost reduction investment cost, and sharing of quality improvement investment cost. We also show that the developed coordination mechanism can lead to Pareto improvement.
Consider that a manufacturer Stackelberg supply chain consists of an upstream supplier and a downstream manufacturer. The manufacturer purchases a component from the supplier and then transforms it into a final product which is sold in a price and quality sensitive market. The manufacturer considers to make R&D investment to improve the product quality and reduce the production cost. We first investigate and derive the optimal investment strategy and pricing decisions by establishing a three-stage game model. We show that the optimal investment strategy and pricing decisions in the decentralized model may deviate from those in the centralized model. We then propose a mechanism to coordinate the decentralized supply chain, by introducing a profit sharing policy, a production cost sharing policy, and an investment cost sharing policy. Finally, we show that both the supplier and the manufacturer can benefit from participating in the proposed coordination mechanism.
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