scholarly journals Joint financing and ordering decisions in a capital-constrained supply chain with risk preference

2020 ◽  
Author(s):  
Zhiyuan Zhen ◽  
Jing Ru Wang
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Risk Preference ◽  
Bank Credit ◽  
Risk Averse ◽  
Initial Capital ◽  
Preference Behavior ◽  
Credit Financing

We consider a two-echelon supply chain consisting of one dominant supplier and one capital-constrained retailer. The retailer needs to solve the shortage of working capital either from a bank or from its core supplier, which offers trade credit when it is also beneficial to itself. We assume the retailer is risk-averse behavior and the supplier has different risk preference behaviors that jointly model risk-averse, risk-neutral, and risk-taking. With a wholesale price contract, we incorporate each member’s risk preference behavior into its objective function. Then we derive the optimal decisions in a Stackelberg game under bank credit financing and trade credit financing, respectively. We find that there exists a supplier’s risk preference threshold that distinguishes financing scheme. When the supplier is a relatively higher risk preference, trade credit financing makes both the retailer and the supplier better off and is a unique financing equilibrium. Otherwise, the members prefer bank credit financing . Besides, the supplier with relatively higher risk preference behavior prefers the retailer with a low initial capital as a partner; the supplier with relatively lower risk preference behavior prefers the retailer with a higher initial capital level. The above theoretical results are verified by numerical analysis.

Optimal decisions and coordination strategy of a capital-constrained supply chain under customer return and supplier subsidy

2018 ◽  
Vol 13 (2) ◽  
pp. 278-301 ◽  
Author(s):  
Gongbing Bi ◽  
Ping Chen ◽  
Yalei Fei
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Modeling Framework ◽  
Content Type ◽  
Initial Capital ◽  
Joint Operations ◽  
Fixed Proportion ◽  
Customer Returns ◽  
Credit Financing

Purpose The purpose of the paper is to explore impacts of financing and supplier subsidy on capital-constrained retailer and the value of returns subsidy contract under a situation where the retailer makes joint operations and finance decisions. Design/methodology/approach This paper considers a two-level supply chain, including a retailer and a supplier. Facing problems of capital constraints and even customer returns, the newsvendor-like retailer orders from a well-capitalized supplier. The supplier allows the retailer a delay in payment and provides a subsidy contract to alleviate its problems if it is profitable. Considering their difference of initial capital status, the retailer is assumed to be Follower of Stackelberg Game and the supplier is the Leader. Findings The supplier return subsidy contract has some merits for both of partners in the chain. And it does not coordinate the supply chain when the retailer has enough initial capital; however, when the retailer is capital constrained, it does. In addition, the retailer’s initial capital level significantly affects the supplier’s subsidy decision. Research limitations/implications Return rate is simplified to a fixed proportion of completed demand. In addition, trade credit is only financing source in this paper, and other types of financing methods, such as bank credit, can be taken too. Originality/value This paper first incorporates trade credit financing and customer returns into a modeling framework to investigate the capital-constrained retailer’s joint operations and finance decisions and the value of supplier’s subsidy contract.

scholarly journals The role of voucher sale in advance for a capital-constrained supply chain

2021 ◽  
Author(s):  
Haijun Wang ◽  
Guanmei Liu
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Optimal Choice ◽  
Bank Loan ◽  
Optimal Decision ◽  
Order Quantity ◽  
Credit Financing ◽  
The Impact

This paper studies voucher sale as an operational method to raise working capital for a supply chain, which consists of a supplier and a capital-constrained retailer. The retailer takes advantage of an online platform to sell vouchers and to get access to borrowing from a bank. By formulating a Stackelberg game model, we show the retailer's possible order quantities in the cases without and with bank loan and analyze the impact of voucher sale on the retailer's optimal choice of order quantity and the supplier's optimal wholesale price. We find that a smaller voucher's price induces the retailer to be more likely to order with loan from a bank while a larger voucher's value induces an order quantity with the loan more difficult to be repaid. In addition, if voucher's price is large, the supplier decides a wholesale price which leads the retailer not to borrow from a bank; and if voucher's price is small, the supplier's optimal decision is obtained by anticipating the retailer to borrow from a bank. We also analyze the impact of voucher sale in the presence of trade credit financing on the firms' decisions. The results show that the voucher's price should be small so that the retailer can repay the supplier if voucher's value is large; otherwise, the retailer either does not borrow from the supplier or may not repay the supplier. Besides, the supplier decides a wholesale price so that the retailer does not borrow or can repay the supplier, except that the voucher's value is large and the voucher's price is medium.

scholarly journals Research on Trade Credit and Bank Credit Based on Dynamic Inventory

2019 ◽  
Vol 11 (13) ◽  
pp. 3608 ◽  
Author(s):  
Lei ◽  
Xu ◽  
Yang
Keyword(s):  
Trade Credit ◽  
Stackelberg Game ◽  
Wholesale Price ◽  
Optimal Strategies ◽  
Bank Credit ◽  
Order Quantity ◽  
Short Term ◽  
Initial Capital ◽  
Stock Status ◽  
Business Financing

Trade credit is a short-term business financing based on purchases between the retailer and the supplier. This paper considers a supply chain consisting of a well-funded supplier and a capital-constrained retailer. At the beginning of each sales season, the retailer need to place an order from the supplier to meet the stochastic demand. The capital-constrained retailer determines the order quantity and whether to borrow loans from a bank or the supplier or just use its initial capital, according to its finance and stock status with the wholesale price provided by the supplier. We build the Stackelberg game with the supplier as the leader and divide the retailer’s initial inventory and capital into different wealth regions to discuss the optimal strategies of different wealth regions. We extend to the two-period dynamic financing model based on dynamic inventory and capital flow so as to obtain the optimal strategy matrix of the retailer and the supplier under bank and trade credit. Numerical results validate our theoretical analysis of bank credit and supplier credit with dynamic inventory under different period setting.

scholarly journals Optimal Procurement Strategy for Supply Chain with Trade Credit and Backorder under CVaR Criterion

2021 ◽  
Vol 13 (18) ◽  
pp. 10201
Author(s):  
Gaoke Wu ◽  
Bo Feng ◽  
Libin Guo
Keyword(s):  
Supply Chain ◽  
Confidence Level ◽  
Value At Risk ◽  
Trade Credit ◽  
Wholesale Price ◽  
Conditional Value At Risk ◽  
Risk Averse ◽  
Financial Pressure ◽  
Strategy Model ◽  
Credit Financing

Some capital-constrained and risk-averse retailers may unable to obtain financing from banks due to insufficient collateral and high loan costs, so some retailers tend to use trade credit financing to ease their financial pressure. For the two echelon supply chain composed of a well-funded supplier and a capital-constrained retailer with risk-averse preference, a trade credit strategy model with the supplier-led is established in this paper. By analyzing both parties’ benefits, we derive the model solution and provide optimal decisions to all petitioners. The results obtained in this paper show that the optimum order quantity under the Conditional Value-at-Risk (CVaR) criterion declines w.r.t. the confidence level, and the wholesale price of the supplier increases w.r.t. the confidence level. The reason is that when the retailer makes fewer orders, the supplier will correspondingly increase the wholesale price to maximize their profit. On the other hand, the ordering policy with allowing backorder will make the retailer place fewer orders. Finally, the proposed model is indicated by the given numerical experiments.

scholarly journals Optimal Operation and Financing Decisions in Green Supply Chain with a Capital-Constrained Manufacturer

2021 ◽  
Vol 2021 ◽  
pp. 1-14
Author(s):  
Lijuan Xia ◽  
Lixin Qiao ◽  
Xiaochen Ma ◽  
Yuanze Sun ◽  
Yongli Li
Keyword(s):  
Business Models ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Optimal Operation ◽  
Initial Capital ◽  
Financing Decisions ◽  
Financing Channels ◽  
Financing Channel ◽  
Credit Financing ◽  
D Investment

Capital constraint, immensely existing in practice, became major stressors for manufacturers during the green research and development (R & D) triggered by managers integrating green concept into their business models. Considering the initial capital of a capital-constrained manufacturer, this paper formulates a Stackelberg game model comprising a manufacturer and a retailer, to discuss the optimal operation and financing decisions under the bank financing channel and trade credit financing channel, to detect the relationship between the manufacturer’s initial capital and green R & D investment, and to find which financing channel is better by comparing the two financing channels when the same initial capital is set. According to the above analysis, the results find that the capital-constrained manufacturer prefers financing only when meeting certain conditions. Furthermore, financing might be detrimental to the manufacturer but always beneficial to the retailer. Especially, under trade credit financing channel, the profit improvement of the retailer is higher than the manufacturer in the same financing channel, which suggests that the retailer has strong internal motivation to cooperate with the manufacturer from the perspective of financing.

scholarly journals Optimal Decision of Deferred Payment Supply Chain considering Bilateral Risk-Aversion Degree

2018 ◽  
Vol 2018 ◽  
pp. 1-11 ◽  
Author(s):  
Liu Liang ◽  
Li Futou
Keyword(s):  
Supply Chain ◽  
Risk Aversion ◽  
Wholesale Price ◽  
Conditional Value At Risk ◽  
Optimal Order ◽  
Risk Averse ◽  
Order Quantity ◽  
Initial Capital ◽  
Optimal Order Quantity ◽  
Degree Of Risk

This paper aims to fill up the gap that the previous research has never explored, the deferred payment supply chain with a risk-averse supplier. To this end, the conditional value-at-risk (CVaR) was adopted as a criterion to measure the influence of retailer’s deferred payment on supply chain performance. According to this criterion, the retailer’s optimal order quantity and the supplier’s optimal wholesale price per unit product were investigated under decentralized decision-making. Then, the existence of a unique optimal strategy was discussed for risk-averse supplier and retailer, and the values of risk-averse, initial capital, and wholesale price were calculated in detail. Finally, the theoretical results were testified through a numerical example. It is concluded that retailer’s optimal order quantity is negatively correlated with the wholesale price, initial capital, and degree of risk aversion, so that the retailer can benefit through proper risk aversion; the supplier’s expected profit decreases with the increase in the degree of risk aversion, yet the optimal wholesale price is determined by the degree of risk aversion of supplier and retailer. The research findings shed valuable new light on how to manage a supply chain involving risk-averse supplier and retailer.

Two-echelon supply chain operational strategy under portfolio financing and tax shield

2019 ◽  
Vol 120 (4) ◽  
pp. 633-656
Author(s):  
Guoshu Dong ◽  
Lihong Wei ◽  
Jiaping Xie ◽  
Weisi Zhang ◽  
Zhefu Zhang
Keyword(s):  
Supply Chain ◽  
Financial Institutions ◽  
Trade Credit ◽  
Stackelberg Game ◽  
Cost Benefit Analysis ◽  
Wholesale Price ◽  
Future Research ◽  
Content Type ◽  
Tax Rate ◽  
Tax Shield

Purpose The development of small- and medium-sized enterprises (SMEs) is vital to the economy, as such the financing of SMEs has become the focus of government and enterprises. The purpose of this paper is to find the operational and financial strategies of the supplier and retailer in supply chain. Design/methodology/approach In a Stackelberg game, supplier moves first setting wholesale price, while the retailer follows, setting the ordering quantity. Enterprises maximize their profits by optimization. When measuring profit targets, the capital constraints and income taxes of two companies are considered. In the portfolio financing model, the retailer can obtain products from suppliers through trade credit, and the supplier can use asset-backed securitization (ABS) to solve his/her financing problems. Findings The wholesale price is a decreasing function of retailer’s initial cash balance, and the supplier’s financing interest rate is a decreasing function of his/her own capital, the incentive effect of the supplier’s price discount strategy on retailer is more intense in the supply chain with high-priced product or high-capital retailer. And in a capital-constrained supply chain, an increase in tax rate or financing rate does not necessarily motivate the supplier to increase wholesale price. Most importantly, if the supplier’s markup is moderate, portfolio financing has value for both retailer and supplier, while solving the financing problems of both parties. Research limitations/implications Future research can consider the explicit and implicit interest when supplier provides trade credit to retailer. It is also possible to consider the portfolio financing when multiple retailers are facing financial constraints. Practical implications It provides guidance for supply chain enterprises with financing needs, helping them find optimal decisions. With financial interest, enterprise income tax on the enterprises’ financing factors will produce a tax shield effect; thus, a cost–benefit analysis with the tax shield effect can provide more accurate picture when making corresponding decisions. Social implications Government takes feasible adjustments of tax rate for the sake of motivation on financial SMEs tax shield. Furthermore, ABS calls for service from financial institutions, which will, in turn, expedite financial institutions revenue. Originality/value The authors provide insights on enterprise financing models, combining ABS with trade credit, expanding enterprise financing channels and enriching the theory of financial supply chain and supply chain management. The authors analyze in detail the influence of tax factors on enterprises by introducing tax factors into traditional process of enterprise operation and financing strategy.

scholarly journals Coordinating contracts as an instrument of supply chain profit maximization under short-term financing necessity

2020 ◽  
Vol 13 ◽  
pp. 57-94
Author(s):  
Irina Berezinets ◽  
◽  
Tatyana Voronova ◽  
Nikolay Zenkevich ◽  
Natalia Nikolchenko ◽  
...  
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Wholesale Price ◽  
Profit Maximization ◽  
Revenue Sharing ◽  
Expected Profit ◽  
Short Term ◽  
Bank Financing ◽  
Revenue Sharing Contract ◽  
Credit Financing

In this paper the problem of the supply chain expected profit maximization under the assumption of the short-term financing necessity for one of the supply chain parties using a coordinating contract is considered. The solution is derived for a two-echelon supply chain under the assumption of product demand being distributed as uniformly. A revenue-sharing contract with bank financing and a modified revenue-sharing contract with trade credit financing are explored. It is stated that none of the studied contracts is coordinating, as they do not provide the supplier’s expected profit maximum. The conditional coordination of supply chain with a modified revenue-sharing contract with trade credit financing is considered if the supply chain and the retailer’s expected profit maximum are reached and the supplier’s expected profit is greater than in case of application of a modified wholesale price contract with trade credit financing and a revenue-sharing contract with bank financing. It is proved that it is beneficial for both supply chain parties and the problem of the supply chain expected profit maximization under the assumption of the short-term financing necessity for one of the supply chain parties can be solved using a modified revenue-sharing contract with trade credit financing.

Joint Operational and Financial Collaboration in a Capital-Constrained Supply Chain Under Manufacturer Collateral

2018 ◽  
Vol 35 (03) ◽  
pp. 1850010 ◽  
Author(s):  
Gongbing Bi ◽  
Yalei Fei ◽  
Xiaoyong Yuan ◽  
Dong Wang
Keyword(s):  
Supply Chain ◽  
Trade Credit ◽  
Wholesale Price ◽  
Distribution Channel ◽  
Optimal Solution ◽  
Bank Credit ◽  
Order Quantity ◽  
Purchase Order ◽  
Constraint Problem ◽  
Fierce Competition

Operational collaboration in a supply chain is important due to the fierce competition among supply chains. However, the collaboration in a supply chain is often hindered by its distribution channel’s lack of funds. It is of significance to alleviate the capital constraint problem of the distribution channel and explore new joint operational and financial collaboration solutions. In this paper, we focus on exploring the optimal solution of operational collaboration in the presence of manufacturer collateral. We consider a supply chain consisting of a well-capitalized manufacturer and a capital-constrained retailer that faces difficulties obtaining credit from the bank. To help the retailer access financing for a purchase order, the manufacturer promises to pay the lender a proportion of the retailer’s loan if the retailer goes bankrupt. We find that when the bank credit with manufacturer collateral is considered as a mix of trade credit and bank credit, the retailer’s financing equilibrium depending on the maximum wholesale price what the manufacturer can set, can be neither trade credit nor bank credit alone, but a combination of them. Moreover, the retailer’s order quantity and the chain’s operational collaboration level will benefit from the manufacturer collateral.

scholarly journals Financing Strategy and Carbon Emission Abatement in a Supply Chain considering Retailers’ Competition

2021 ◽  
Vol 2021 ◽  
pp. 1-19
Author(s):  
Man Yu ◽  
Tuo Li ◽  
Zhanwen Shi
Keyword(s):  
Supply Chain ◽  
Interest Rate ◽  
Carbon Emission ◽  
Trade Credit ◽  
Bank Credit ◽  
Emission Abatement ◽  
Dual Channel ◽  
Financing Channels ◽  
Credit Financing ◽  
Financing Strategy

This paper investigates the issues of financing channels (bank credit financing, trade credit financing, and dual-channel financing) and carbon emission abatement in a supply chain consisting of one capital-constrained manufacturer and two capital-constrained retailers. Compared with bank credit, we find that every member can make more profit under trade credit when only one financing channel is available. When both bank credit and trade credit are available, the retailers’ financing strategy highly depends on the interest rates charged by the creditors. In addition, we also examine the impact of financing channels on emission abatement. It shows that the manufacturer reduces more carbon emissions under trade credit. Interestingly, the emission abatement has nothing to do with trade credit interest rate when retailers only adopt trade credit, whereas it is closely related to trade credit interest rate under dual-channel financing.

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