Supply Chain Proximity and Product Quality

30 Pages Posted: 13 Jul 2016 Last revised: 21 Oct 2018

Date Written: June 6, 2018


We estimate the effect of supply chain proximity on product quality. Merging four automotive datasets, we create a supply chain sample that reports the failure rate of 27,807 auto components, the location of 529 upstream component factories, and the location of 275 downstream assembly plants. We find that defect rates are higher when upstream and downstream factories are farther apart. Specifically, we estimate that increasing the distance between an upstream component factory and a downstream assembly plant by an order of magnitude increases the component’s expected defect rate by 3.9%. We find that quality improves more slowly across geographically dispersed supply chains. We also find that supply chain distance is more detrimental to quality when automakers produce early-generation models or high-end products, when they buy components with more complex configurations, or when they source from suppliers who invest relatively little in research and development.

Keywords: Product quality, empirical supply chain management, automotive industry, sample selection model, econometrics

Suggested Citation

Bray, Robert and Serpa, Juan Camilo and Colak, Ahmet, Supply Chain Proximity and Product Quality (June 6, 2018). Available at SSRN: or

Robert Bray

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Juan Camilo Serpa (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1

Ahmet Colak

Clemson University, College of Business ( email )

101 Sirrine Hall
Clemson, SC 29634
United States

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