Supply chain management(SCM) became the popular management issue and research topic as the core of corporate strategy. Companies need to consider the efficiency of the entire supply chain as well as their internal processes in order to remain competitive. However there are practical restrictions in executing supply chain management and companies experience difficulties in implementing supply chain management because of the absence of systematic approach. Meanwhile academic research has focused on the comprehensive concepts of supply chain management and rarely contributed to practical applications. Therefore this study examines the changes in the amount of the investment by the entities of supply chain according to the contracts on the basis of product modularity. The result suggests several implications for the practice of supply chain management. When a buyer outsources a modular part, he can make contracts by which a supplier reimburses the quality costs. The contracts can be classified into 3 cases. First, if a supplier reimburses the internal failure cost to a buyer, the buyer is willing to invest more while the supplier invests less. Second, if a supplier reimburses the external failure cost to a buyer, the buyer will reduce the investment but the supplier raises the investment. Third, if a supplier reimburses both of the quality costs to a buyer, the investments can be wellbalanced under the condition that both reimbursements are equal. This is a device for motivating buyers’ and suppliers’ investment incentives simultaneously. And this suggests that well-designed contract can prohibit moral hazard. This study finds out the changes of buyers’ and suppliers’ investments according to the contracts and suggests that companies need to consider not only relevant factors such as price and reimbursement but also a company-specific decision factor like an investment for a strategic relationship.