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