Sourcing models under credit guarantee mechanism with information asymmetry
Date Issued
2015
Date
2015
Author(s)
WU, CHENG-FENG
Abstract
In buyer-supplier relationships, financial shortcoming and supply risks are important concerns. To solve a small and median enterprise supplier’s financial difficulty, distributors can offer credit guarantees. To manage supply disruption and cost uncertainties in the supply chain, distributor can adopt incentive contracts. This is a legal strategy in sole sourcing and dual sourcing situations. This study attempts to examine the issue of a credit guarantee mechanism from the buyer’s perspective, with incentive theory under a sole sourcing or dual sourcing strategy. Under cash constraint of the unreliable supplier A, dual sourcing strategy is better than sole sourcing strategy. As loan-to-value increases, fill rate increases or disruption rate decreases, the expected profit of the distributor increases. A decrease of disruption rate is prior to an enhancement of fill rate. As a coordinator, the distributor is expected to take loan-to-value, fill rate and disruption rate into account to integrate supply chain. The distributor may take the enhancement fill rate as a condition to be guarantor and promising the profit for the financial institution. Consequently, the distributor is able to mitigate supply risk by sourcing strategy under the mechanism in which the financial difficulty for the supplier is solved.
Subjects
incentive theory
supply chain financing
credit guarantee mechanism
dual sourcing
Type
thesis
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ntu-104-D99741006-1.pdf
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