Supply chain product quality control strategy in three types of distribution channels

Abstract

Based on a three-stage stackelberg dynamic game analysis, this paper constructs a product quality control strategy model for three types of distribution channels (direct channel, retail channel and mixed channel) in a three-echelon supply chain, which is composed of one manufacturer, one retailer and the final customer. This paper studies how to design a distribution channel strategy and provides a product quality control strategy. Furthermore, this paper analyzes three types of distribution channels strategy in the context of how they influence a manufacturer’s product quality decision and quality prevention strategy, a retailer’s product pricing decision and quality inspection strategy, and the final customer’s product demand decision. We compare the manufacturer’s product quality level, quality prevention effort level, wholesale price, direct sale price and the retailer’s quality inspection effort level, retail price in three types of distribution channels and determine the manufacturer’s and retailer’s expected profits function and the final customer’s consumer surplus. In addition, we introduce the distribution channels demand elasticity ratio to analyze the influence of determining the product quality control strategy. Most importantly, we conduct a numerical sample analysis that will prove the model’s effectiveness and indicate a specific application in practice.