Supply chain finance: Optimal introduction and adoption decisions

David A. Wuttke, Constantin Blome, H. Sebastian Heese and Margarita Protopappa-Sieke

International Journal of Production Economics, 2016, vol. 178, issue C, 72-81

Abstract: Supply chain finance (SCF) can improve supply chain performance by facilitating longer payment terms for buyers and better access to financing for suppliers. In spite of these clear benefits, there is empirical evidence for some hesitation and resistance to SCF adoption, manifesting in an often substantial time lag between a buyer's introduction of SCF and its adoption by all targeted suppliers. Observed adoption processes often resemble the s-shaped Bass-curve suggesting that successful early adoptions support adoption decisions by other suppliers. Based on these observations, we consider supplier SCF adoption decisions within a diffusion model, to obtain insights regarding a buyer's optimal SCF introduction decisions in terms of timing and payment terms. We find that initial payment terms and procurement volume strongly affect the optimal timing of SCF introduction and optimal payment term extensions. The degree to which the buyer can influence suppliers in their adoption decisions affects the optimal introduction timing, but not optimal payment terms. Interestingly, our results suggest that, in spite of the clear benefits, many buyers might be well-advised to postpone their SCF implementations.

Keywords: Supply chain finance; Reverse factoring; Operations management and finance interface; Diffusion model (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (45)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:178:y:2016:i:c:p:72-81

DOI: 10.1016/j.ijpe.2016.05.003

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