Study On Supplier’s Moral Hazard Management

With globalization and integration of the world economy, the cooperation betweendifferent companies and organizations becomes much closer, and supply chain is the mostclosely cooperative model. While in the supply chain, each companies or organizations isinterest-independent agents, and the facts that information asymmetry between differentparties is always existing, and when each party is seeking for their own benefit at themaximum level, then the moral hazard is being brought up.This article firstly gives an overall picture on what’s the current study and researchsituation regarding moral hazard in the supply chain, as well as supply chain managementtheory, then states the root cause of the suppliers’ moral hazard as we as the risk types, andthen focus on how the core enterprise in the supply chain manage moral hazard throughrisk prevention and mitigation solution. Finally comes up a case study, how CS companyprevent and manage their suppliers’ moral hazard from supplier selection and supply baseestablishment, their incentives mechanism and constraint mechanism on regular supplybase management, as well as supplier agreement management.This paper gives China local enterprise a practicable and directive guild line on how toprevent and manage suppliers’ moral hazard and avoid such kind of risk when theyestablish their high efficient and competitive supply chain, then supporting companyoverall achievement.