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October  2015, 11(4): 1073-1087. doi: 10.3934/jimo.2015.11.1073

Comparative analysis of supply chain financing strategies between different financing modes

1. 

Central University of Finance and Economics, Beijing 100081, China, China

Received  June 2013 Revised  September 2014 Published  March 2015

In the supply chain finance (SCF) system composed of a capital-constrained retailer, a manufacturer and a commercial bank, we design two different limited financing modes, namely, a financing mode based on order and on the capital-gap. Considering the retailer's capital constraint and bankruptcy risk, we formulate a Stackelberg game in which the manufacturer acts as the leader and analyze the optimal decisions for each participant. Finally, we conduct numerical examples and make comparative analyses between these two different financing modes in terms of optimal ordering and pricing decisions, as well as optimal expected profits. It is concluded that the optimal expected profit of SCF under either financing mode would be higher than that in the case of no capital constraint or capital-constrained without financing. Moreover, the financing mode based on order would encourage the manufacturer to earn more and the financing mode based on capital-gap would be more favorable to the retailer.
Citation: Nina Yan, Baowen Sun. Comparative analysis of supply chain financing strategies between different financing modes. Journal of Industrial & Management Optimization, 2015, 11 (4) : 1073-1087. doi: 10.3934/jimo.2015.11.1073
References:
[1]

J. Arnold and S. Minner, Financial and operational instruments for commodity procurement in quantity competition,, International Journal of Production Economics, 131 (2011), 96.  doi: 10.1016/j.ijpe.2010.02.007.  Google Scholar

[2]

J. A. Buzacott and R. Q. Zhang, Inventory management with asset-based financing,, Management Science, 50 (2004), 1274.  doi: 10.1287/mnsc.1040.0278.  Google Scholar

[3]

R. Caldentey and X. Chen, The Role of financial services in procurement contracts, The handbook of integrated risk management in global supply chains,, John Wiley & Sons, (2011).   Google Scholar

[4]

R. Caldentey and M. B. Haugh, Supply contracts with financial hedging,, Operations Research, 57 (2009), 47.  doi: 10.1287/opre.1080.0521.  Google Scholar

[5]

X. Chen and A. Wang, Trade credit contract with limited liability in the supply chain with budget constraints,, Annals of Operations Research, 196 (2012), 153.  doi: 10.1007/s10479-012-1119-0.  Google Scholar

[6]

M. Dada and Q. Hu, Financing newsvendor inventory,, Operations Research Letters, 36 (2008), 569.  doi: 10.1016/j.orl.2008.06.004.  Google Scholar

[7]

P. Hans-Christian and G. Moritz, Supply chain finance: Optimizing financial flows in supply chains,, Logistics Research, 1 (2009), 149.   Google Scholar

[8]

B. Jing, X. Chen and G. Cai, Equilibrium financing in a distribution channel with capital constraint,, Production and Operations Management, 21 (2012), 1090.  doi: 10.1111/j.1937-5956.2012.01328.x.  Google Scholar

[9]

P. Kouvelis and W. Zhao, The Newsvendor Problem and Price-Only Contract When Bankruptcy Costs Exist,, Production and Operations Management , 20 (2011), 921.  doi: 10.1111/j.1937-5956.2010.01211.x.  Google Scholar

[10]

P. Kouvelis and W. Zhao, Financing the Newsvendor: Supplier vs. Bank, and the Structure of Optimal Trade Credit Contracts,, Operations Research, 60 (2012), 566.  doi: 10.1287/opre.1120.1040.  Google Scholar

[11]

G. Lai, L. G. Debo and K. Sycara, Sharing inventory risk in supply chain: The implication of financial constraint,, Omega, 37 (2009), 811.  doi: 10.1016/j.omega.2008.06.003.  Google Scholar

[12]

M. A. Lariviere, A note on probability distributions with increasing generalized failure rates,, Operations Research, 54 (2006), 602.  doi: 10.1287/opre.1060.0282.  Google Scholar

[13]

C. H. Lee and B. D. Rhee, Coordination contracts in the presence of positive inventory financing costs,, International Journal of Production Economics, 124 (2010), 331.   Google Scholar

[14]

C. H. Lee and B. D. Rhee, Trade credit for supply chain coordination,, European Journal of Operational Research, 214 (2011), 136.  doi: 10.1016/j.ejor.2011.04.004.  Google Scholar

[15]

N. R. Srinivasa Raghavan and V. K. Mishra, Short-term financing in a cash-constrained supply chain,, International Journal of Production Economics, 134 (2011), 407.   Google Scholar

[16]

S. A. Yang and J. R. Birge, How inventory is (should be) financed: Trade credit in supply chain with demand uncertainty and cost of financial distress,, Working Paper, (2003).   Google Scholar

show all references

References:
[1]

J. Arnold and S. Minner, Financial and operational instruments for commodity procurement in quantity competition,, International Journal of Production Economics, 131 (2011), 96.  doi: 10.1016/j.ijpe.2010.02.007.  Google Scholar

[2]

J. A. Buzacott and R. Q. Zhang, Inventory management with asset-based financing,, Management Science, 50 (2004), 1274.  doi: 10.1287/mnsc.1040.0278.  Google Scholar

[3]

R. Caldentey and X. Chen, The Role of financial services in procurement contracts, The handbook of integrated risk management in global supply chains,, John Wiley & Sons, (2011).   Google Scholar

[4]

R. Caldentey and M. B. Haugh, Supply contracts with financial hedging,, Operations Research, 57 (2009), 47.  doi: 10.1287/opre.1080.0521.  Google Scholar

[5]

X. Chen and A. Wang, Trade credit contract with limited liability in the supply chain with budget constraints,, Annals of Operations Research, 196 (2012), 153.  doi: 10.1007/s10479-012-1119-0.  Google Scholar

[6]

M. Dada and Q. Hu, Financing newsvendor inventory,, Operations Research Letters, 36 (2008), 569.  doi: 10.1016/j.orl.2008.06.004.  Google Scholar

[7]

P. Hans-Christian and G. Moritz, Supply chain finance: Optimizing financial flows in supply chains,, Logistics Research, 1 (2009), 149.   Google Scholar

[8]

B. Jing, X. Chen and G. Cai, Equilibrium financing in a distribution channel with capital constraint,, Production and Operations Management, 21 (2012), 1090.  doi: 10.1111/j.1937-5956.2012.01328.x.  Google Scholar

[9]

P. Kouvelis and W. Zhao, The Newsvendor Problem and Price-Only Contract When Bankruptcy Costs Exist,, Production and Operations Management , 20 (2011), 921.  doi: 10.1111/j.1937-5956.2010.01211.x.  Google Scholar

[10]

P. Kouvelis and W. Zhao, Financing the Newsvendor: Supplier vs. Bank, and the Structure of Optimal Trade Credit Contracts,, Operations Research, 60 (2012), 566.  doi: 10.1287/opre.1120.1040.  Google Scholar

[11]

G. Lai, L. G. Debo and K. Sycara, Sharing inventory risk in supply chain: The implication of financial constraint,, Omega, 37 (2009), 811.  doi: 10.1016/j.omega.2008.06.003.  Google Scholar

[12]

M. A. Lariviere, A note on probability distributions with increasing generalized failure rates,, Operations Research, 54 (2006), 602.  doi: 10.1287/opre.1060.0282.  Google Scholar

[13]

C. H. Lee and B. D. Rhee, Coordination contracts in the presence of positive inventory financing costs,, International Journal of Production Economics, 124 (2010), 331.   Google Scholar

[14]

C. H. Lee and B. D. Rhee, Trade credit for supply chain coordination,, European Journal of Operational Research, 214 (2011), 136.  doi: 10.1016/j.ejor.2011.04.004.  Google Scholar

[15]

N. R. Srinivasa Raghavan and V. K. Mishra, Short-term financing in a cash-constrained supply chain,, International Journal of Production Economics, 134 (2011), 407.   Google Scholar

[16]

S. A. Yang and J. R. Birge, How inventory is (should be) financed: Trade credit in supply chain with demand uncertainty and cost of financial distress,, Working Paper, (2003).   Google Scholar

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