Effects of Trust Mechanisms on Supply-Chain Performance: A Multi-Agent Simulation Study

Authors:
Fu-Ren Lin;Yu-Wei Sung;Yi-Pong Lo
Affiliations:
Department of Business Administration of the University of Illinois at Urbana-Champaign;Department of Urban Planning of National Chen Kung University, Taiwan;Department of Information Management of National Sun Yat-sen University, Kaohsiung, Taiwan
Venue:
International Journal of Electronic Commerce
Year:
2003

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Abstract

This study examines the effect of trust mechanisms on supply-chain performance in order to help net-enabled organizations select suppliers. Trust mechanisms are proposed, and a multi-agent simulation platform is used to evaluate their supply-chain performance in respect to order quantity and order-interarrival time in four different market environments. Sensitivity analysis of the proposed trust mechanisms finds that they reduce the average cycle time and increase the in-time order-fulfillment rate in certain market environments at the expense of the material cost. The cost increase is controlled within an acceptable range and can be treated as a premium paid for shorter average cycle time. A higher trustor propensity to trust renders to a higher in-time order-fulfillment rate. The study will help management rationalize the development of software agents embedded with trust mechanisms that can improve supply-chain performance. In the future, more sophisticated agent technologies may be able to execute supply-chain negotiation based on the trust mechanisms developed in this study.