Trust-based cooperation in Silk Road Economic Belt countries: strategical ordering in the assembly supply chain

Abstract

PurposeThis paper's purpose is to suggest that manufacturers strategically place soft orders for assembly materials with suppliers in Silk Road Economic Belt countries who probably doubt the realization of the soft orders placed.Design/methodology/approachFirst, a two-stage Stackelberg competition is constructed, taking into account the supplier's trust level in formulating the decision process in the assembly supply chain. The authors then provide a buyback contract to coordinate the supply chain, in which the manufacturer obtains enough supplies by sharing some of the perceived risks of not fully trusted suppliers. Furthermore, the authors conduct a numerical study to investigate the influence of trust under a decentralized case and a buyback contract.FindingsThe authors found that all supply chain partners in Silk Road Economic Belt countries experience potential losses due to not fully trusting certain conditions. The study also shows that, in Silk Road Economic Belt countries, operating under a buyback contract is better than being without one in terms of assembly supply chain performance.Research limitations/implicationsOn the one hand, the authors only consider the asymmetry of demand information without considering that of cost structure information. On the other hand, a natural extension of the paper is to integrate single-period transactions into the multi-period transaction problem setting. As all these issues require substantial effort, the authors reserve them for future exploration.Originality/valueDoing business with not-fully-trustworthy partners in Silk Road Economic Belt countries is risky, and this study reveals how trust works in global cooperation and with strategic reactions in situations of partial trust.