Supplier Audit Information Sharing and Responsible Sourcing

Abstract

We develop a game-theoretic model to study the incentive for competing manufacturers to share supplier audit information. Based on the audit information, each manufacturer decides whether to source from a common supplier who has uncertain responsibility violation risk or to switch to a backup supplier who has no responsibility violation risk but charges a higher price. When supplier responsibility violation occurs, some consumers boycott the manufacturers involved. Audit information allows a manufacturer to reduce the uncertainty about the risk of the common supplier. We show that audit information sharing may make the manufacturers’ sourcing strategies more or less differentiated. As a result, the information-sharing decision is not monotone in the model parameters. We fully characterize the manufacturers’ equilibrium audit information-sharing and sourcing decisions and establish conditions under which audit information sharing induces the manufacturers to adopt more or less responsible sourcing strategies. We also show that a manufacturer could be better off when the cost premium of sourcing from the backup supplier or the risk of the common supplier becomes higher or the audit information becomes less accurate. We consider several extensions of the base model and demonstrate that the main insights remain mostly valid. This paper was accepted by Charles Corbett, operations management.

Inducing supplier backup via manufacturer information sharing under supply disruption risk

“…Broadly, this paper also contributes to the vast literature on information sharing (e.g., Ha et al, 2017 , Liu et al, 2021 , Li et al, 2021 , Ha et al, 2022 ), especially the stream of work studying the impact of information asymmetry on the risk management strategy of supply disruption ( Fang et al, 2014 ). Most existing studies assume that the supply disruption probability is public information for firms.…”

Insight into China's Economically Motivated Adulteration Risk in Online Agricultural Product Sales

“…Naturally, the more qualityconscious the consumers are or the more severe the sellers' adulteration behavior revealed, the greater the negative externality is (Chen et al, 2020). For example, the greater the amount of adulterants, the easier it is for adulterated sellers to be detected, resulting in a "bad word-ofmouth effect", with some consumers boycotting the seller concerned (e.g., Ha et al, 2022), which will reduce the overall demand of the EP as well as that of other sellers. Therefore, we denote the total expected demand on the EP as 𝐷(𝑥 𝑖 , 𝑥 −𝑖 ) = 1 − 𝜌(𝑥 𝑖 + 𝑥 −𝑖 ) , where −𝑖 denotes all sellers other than 𝑖; 𝑥 −𝑖 = (𝑥 1 , … , 𝑥 𝑖−1 , 𝑥 𝑖+1 , … , 𝑥 𝑚 ) represents the decisions of other sellers, and 𝜌 > 0 measures the level of consumers' quality consciousness.…”

Supply chain short‐term financing for responsible production at small and medium‐sized enterprises

“…Caro et al (2018), Chen et al (2020a), Feng et al (2022), Dong et al (2022), andCho (2020) aim to identify the effective and cost-efficient regimes of auditing, while Huang et al (2022) and Zhang et al (2022) study strategic auditing omissions. Ha et al (2023) step further to explore how auditing information sharing may affect the competition landscape. However, auditing has its own limitations.…”