TY - JOUR

T1 - Supply chain finance

T2 - Optimal introduction and adoption decisions

AU - Wuttke, David A.

AU - Blome, Constantin

AU - Sebastian Heese, H.

AU - Protopappa-Sieke, Margarita

N1 - Publisher Copyright: © 2016 Elsevier B.V. All rights reserved.

PY - 2016/8/1

Y1 - 2016/8/1

N2 - 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.

AB - 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.

KW - Diffusion model

KW - Operations management and finance interface

KW - Reverse factoring

KW - Supply chain finance

U2 - 10.1016/j.ijpe.2016.05.003

DO - 10.1016/j.ijpe.2016.05.003

M3 - Journal article

AN - SCOPUS:84969264385

VL - 178

SP - 72

EP - 81

JO - International Journal of Production Economics

JF - International Journal of Production Economics

SN - 0925-5273

ER -