Design of Quality Control Mechanism in ATO Supply Chain with Double-sided Moral Hazard Based on Quality Tracing

In this paper, a quality control model based on double-sided moral hazard is developed for the ATO (assemble-to-order) system, in which the final product manufacturer, as the core firm in the system, controls the quality of components from suppliers only by quality tracing; and the incentive mechanism for quality tracing in ATO system is designed. It is discovered that the final product manufacturer can design a reasonable quality control mechanism to stimulate component suppliers and itself to manufacture at the quality levels predetermined by both sides, as a result, the profit of ATO system and final product manufacturer will be maximized.