Bank Mediated Financial Supply Chains: Implications for Supply Chain Strategy and Operations

Document Type: Research Paper

Authors

The David D. Reh School of Business, Clarkson University, Potsdam, New York, USA

Abstract

The purpose of this paper is to examine how bank enabled electronic financial supply chain management (FSCM) systems influence the relationship between business partners in dyadic supply chains in emerging economies such as India. Specifically, we utilize transaction cost theoretic lens to: (1) explore how banks, via FSCM, influence the financial and material flows in supply chains (2) detail the changes to exchange characteristics between supply chain partners and (3) evaluate the performance outcomes of changes to the exchanges characteristics. We utilized inductive, multiple case study as the methodological approach. We collected data via semi structured interviews from seven firms. In all, we conducted 20 in-depth interviews lasting over 20 hours. Our findings are that Supply chain members would adopt FSCM to make transactions cost efficient. Banks would motivate their clients to encourage adoption of FSCM system to expand market and reduce business uncertainty. Adoption of FSCM system would increase when the focal supply chain member gives assurance about the business prospects and creditworthiness of their trading partners. Adoption of FSCM system is more likely when they build on prior e-enabled exchange systems with their clients. Trustworthy, cooperative and disciplined behavior among the firms is crucial for a FSCM system to function well. We identified several important constructs and relationships that help to understand the exchange dynamics in financial supply chains.

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