Risk and quality control in a supply chain

Competitive and collaborative approaches

Charles Tapiero, K. Kogan

Research output: Contribution to journalArticle

Abstract

This paper provides a quantitative and comparative economic and risk approach to strategic quality control in a supply chain, consisting of one supplier and one producer, using a random payoff game. Such a game is first solved in a risk-neutral framework by assuming that both parties are competing with each other. We show in this case that there may be an interior solution to the inspection game. A similar analysis under a collaborative framework is shown to be trivial and not practical, with a solution to the inspection game being an all or nothing solution to one or both the parties involved. For these reasons, the sampling random payoff game is transformed into a Neyman-Pearson risk constraints game, where the parties minimize the expected costs subject to a set of Neyman-Pearson risk (type I and type II) constraints. In this case, the number of potential equilibria can be large. A number of such solutions are developed and a practical (convex) approach is suggested by providing an interior (partial sampling) solution for the collaborative case. Numerical examples are developed to demonstrate the procedure used. Thus, unlike theoretical approaches to the solution of strategic quality control random payoff games, the approach we construct is both practical and consistent with the statistical risk Neyman-Pearson approach.

Original languageEnglish (US)
Pages (from-to)1440-1448
Number of pages9
JournalJournal of the Operational Research Society
Volume58
Issue number11
DOIs
StatePublished - Nov 2007

Fingerprint

Supply chains
Quality control
Inspection
Sampling
Risk control
Supply chain
Economics
Costs
Inspection game

Keywords

  • Game theory
  • Quality control
  • Supply chains

ASJC Scopus subject areas

  • Management of Technology and Innovation
  • Strategy and Management
  • Management Science and Operations Research

Cite this

Risk and quality control in a supply chain : Competitive and collaborative approaches. / Tapiero, Charles; Kogan, K.

In: Journal of the Operational Research Society, Vol. 58, No. 11, 11.2007, p. 1440-1448.

Research output: Contribution to journalArticle

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