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Technical note: Reexamination of all‐or‐none inspection policies in a supply chain with endogenous product quality

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  • Hong Wan
  • Xiaowei Xu

Abstract

This note studies the optimal inspection policies in a supply chain in which a manufacturer purchases components from a supplier but has no direct control of component quality. The manufacturer uses an inspection policy and a damage cost sharing contract to encourage the supplier to improve the component quality. We find that all‐or‐none inspection policies are optimal for the manufacturer if the supplier's share of the damage cost is larger than a threshold; otherwise, the manufacturer should inspect a fraction of a batch. © 2008 Wiley Periodicals, Inc. Naval Research Logistics, 2008

Suggested Citation

  • Hong Wan & Xiaowei Xu, 2008. "Technical note: Reexamination of all‐or‐none inspection policies in a supply chain with endogenous product quality," Naval Research Logistics (NRL), John Wiley & Sons, vol. 55(3), pages 277-282, April.
    • Handle: RePEc:wly:navres:v:55:y:2008:i:3:p:277-282
    DOI: 10.1002/nav.20273
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    References listed on IDEAS

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    Cited by:

    1. Aadhaar Chaturvedi, 2021. "Excessive Competition and Supplier Non‐Performance Risk: Trade‐offs in Reverse Auctions," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 3073-3093, September.

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