Supply chain collaboration with complementary quality design and greener production

In this paper, we investigate an assemble-to-order supply chain including a manufacturer and two complementary suppliers, one produces component associated with traditional quality while the other produces component associated with environmental quality of the manufacturer's product. In response to consumers' demand over enhancing product's both quality levels, the manufacturer may collaborate with component suppliers to enhance quality design. Four model cases are considered: collaboration between the manufacturer and either supplier over associated quality design, collaboration between the manufacturer and both suppliers over quality design, or no collaboration. Particularly, we focus on the impact of governmental taxes over production emissions of firms. In response to the coercive governmental penalty, firms will invest in greener production to reduce emissions. We compare suppliers' quality design, all firms' emission reduction levels, profits as well as the total net impact on environment under the four model cases and how these equilibriums will be affected by governmental taxation and how firms should choose collaboration model. [Received 13 July 2013; Revised 16 December 2013; Revised 28 March 2014; Accepted 20 April 2014]