Short-term financing in a cash-constrained supply chain

In this paper we consider a two-level supply chain with a single retailer and a manufacturer, where both the firms are facing financial constraints and can not produce/order their optimal quantity. Our work shows that a lender who finances the manufacturer has a motivation to finance the retailer as...

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Bibliographic Details
Published in:International journal of production economics 2011-12, Vol.134 (2), p.407-412
Main Authors: Srinivasa Raghavan, N.R., Mishra, Vinit Kumar
Format: Article
Language:English
Subjects:
Cash-constrained supply chain
Commercial financing
Economics
Finance
Financing
Lenders
Loans
Numerical analysis
Optimization
Risk management
Studies
Supply chain financing
Supply chain financing Cash-constrained supply chain Risk management Commercial financing
Supply chain management
Supply chains
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Summary:In this paper we consider a two-level supply chain with a single retailer and a manufacturer, where both the firms are facing financial constraints and can not produce/order their optimal quantity. Our work shows that a lender who finances the manufacturer has a motivation to finance the retailer as well. Motivated by this, we investigate lender's problem of financing both the firms by making a joint decision on the loan amount and comparing it with the case when lender makes independent decision on loan amount for both the firms. Our numerical study indicates that if one of the firms in the supply chain has sufficiently low cash, joint decision (we refer to it as supply chain financing) may be better not only for the lender but for the retailer and manufacturer as well.
ISSN:0925-5273
1873-7579
DOI:10.1016/j.ijpe.2009.11.014