Trade credit evaluation for Taiwan's broadband communications equipment manufacturers

Selecting trade credit instruments has profound impacts not only on the sellers/exporters but also on the buyers/importers. In this paper, we propose a fuzzy multiple-criteria-decision-making (MCDM) structure to trade credit evaluation. By considering the telegraphic transfer (T/T) advance, the letter of credit (L/C), the documentary collection, and the open account (O/A), a fuzzy MCDM approach is applied for the first time to investigate the trade credit offer. We use Taiwan's broadband communications equipment manufacturers in business in 2007 as an example. The results of our investigations differ according to three scenarios. This study provides an aggregate, comprehensive, and scientific framework on trade credit evaluation. This framework not only includes three objectives (risk, cost, and firm policy), but also four alternatives (T/T advance, LC, documentary collection and O/A) for the decision maker to use when considering strategic trade credit offers.