Celebrating the 45th Anniversary of the University of Macau:
Sourcing Under Supply Uncertainty: Impact of International Commercial Terms
Prof. Amanda WANG Yulan
Professor, Department of Logistics and Maritime Studies
Faculty of Business, Hong Kong Polytechnic University
Date: 27 March 2026 (Friday)
Time: 15:30-17:00
Venue: E22-1011
Host: Prof. Grace Qi FU, Associate Professor in Business Intelligence and Analytics
Abstract
In this study, we consider a decentralized global supply chain that consists of a domestic buyer, a reliable oversea supplier with a high tariff rate (e.g., a supplier located outside the free trade area), an unreliable oversea supplier with a low tariff rate (e.g., a supplier located in a free trade area), and a logistics service provider (LSP) that transports products from the oversea suppliers to the domestic buyer. Based on who shall bear the freight charge and import tariff, the buyer and the supplier can undertake one of the following three trade contracts specified by Incoterms: Ex Works (EXW), Delivered at Place (DAP), or Delivered Duty Paid (DDP). We formulate a three-tier decentralized supply chain game and fully characterize each member’s preference over the aforementioned trade contracts. Among other results, we find that, as the tariff rate increases, counter to our intuition, the buyer is more willing to bear the tariff and freight charge. Across all three trade contracts, a higher supplier unreliability weakens the competition between suppliers. By contrast, a higher tariff rate can intensify supplier competition, particularly under DAP. We further investigate the impacts of introducing competition into the LSP market and show that it benefits both the buyer and the reliable supplier but may hurt the unreliable supplier when the tariff rate is high. Our findings suggest that both buyers and reliable suppliers outside free trade areas could tailor-make their trade contract decisions based on the prevailing tariff environment to safeguard profitability, while unreliable suppliers within free trade areas need to take into account both reliability and cost to stay competitive. Furthermore, our results highlight the role of tariff adjustments as an effective short-term mechanism to maintain sourcing within free trade areas. A related empirical study investigates the structural evolution of global supply chain networks (GSCNs), showing the GSCN is shifting towards a structure that enhances local redundancy, global flexibility, and resilience. We observe reglobalization, rather than deglobalization, in the form of regionalization.
Speaker
Yulan Wang is a full professor and associated head (research) of the Department of the Logistics and Maritime Studies at Faculty of Business of the Hong Kong Polytechnic University. She has a broad research interest in supply chain management, socially responsible operations, platform operations and behavioral operations. Her research work has been published in leading academic journals such as Management Science, Operations Research, Manufacturing & Service Operations Management, and Production and Operations Management. Dr Wang serves as a department editor of Decision Sciences, an area editor of Omega, an associate editor of Manufacturing & Service Operations Management and Naval Research Logistics, and a senior editor of Production and Operations Management.
All are welcome!
