Outsourcing strategies for manufacturers facing reputation oriented consumers

Consumer behavior is an important factor when the company makes decisions. This paper examines the outsourcing strategy for manufacturers facing reputation oriented consumers. There are two production strategies: insourcing and outsourcing. We have constructed a computational experiment model based on multi-agent and introduced reinforcement learning algorithms to the decision-making. The model is more in line with the actual situation. The result shows that: (i) the consumers buy products based on reputation, which intensifies competition among manufacturers and improves supply chain efficiency; (ii) when consumers with positive utility buy randomly, the manufacturer should produce the products in house only the manufacturer's unit production cost is low enough; otherwise, outsourcing is the manufacturer's best strategy. When consumers purchase goods based on the reputation, outsourcing production is the manufacturer's best strategy, only the supplier's unit production cost and quality effort cost are much lower than manufacturer's; otherwise, the manufacturers should produce by themselves.