Abstract1)Recent scandals of milk additives in several developing countries provoked controversy about quality issue of dairy products, grapping academic attention to the dairy supply chain. In this paper, we first focus on moral hazard problem of self-interested entities about the quality across the dairy supply chain, due to unobservable and unverifiable quality management efforts of all entities – including dairy producers, stations, and a final producer – and high inspection cost for the quality. Based on the identified moral hazard problem, we understand why the adoption of IoT-based tracking systems about quality produced from each entity is a must, different from RFID-based tracking systems.