Optimal Financing, Production And Operations Management With Logistics Financing

With the total life cycle of product and service becoming shorter and shorter, and with raw material costs and labor cost becoming skyrocketing, operation costs of firms increase, and firms are often lack of funds. Many medium and small-sized enterprises, even big businesses go bankrupt due to cash flow disruption. In practice, many firms often encounter capital constraints. It was difficulty for them to finance before, but now, more and more banks have offer logistics finance and supply chain finance options for firms, which can remove their capital constraints, and has affected deeply their operations management.Firms should reconsider their operations management strategy under this situation, for example, firms should decide whether to finance with cost, if case, how they should decide their inventory and production strategies, and how it affects the profits. All these issues should be studied. This paper aims at the sellers’and manufacturers’ decisions on finance, production and inventory, and establishes models to analyze the impact of logistics finance on these decisions.In this paper, we first review the literature on logistics finance and supply chain logistics, and point out what should been studied but not. Then, based on EOQ model, we examine the seller’s decisions on finance and order with inventory financing when demand is deterministic, we present a model to maximize the profit and a model to maximize profit margin, and give an algorithm for them. And we examine the decisions on finance and order with inventory financing when demand is stochastic, we present a model to maximize profit and a model to maximize profit margin for risk neutral seller and risk aversion seller, we give the optimal solution, and analyze the proposition of the models. Finally, we examine the decisions on financing and production for manufacturer under purchase order financing, and we establish a model to maximize profit and a model to maximize profit margin with deterministic demand when order can be implemented one time and several time. We also examine these decisions in the setting with stochastic demand, and establish two models to maximize profit and profit margin, respectively for risk neutral seller and risk aversion seller.The main results in this paper include:(1). The amount of order and production and profit will increase compared with the setting without logistics financing.(2). The amount of order and production will increase, but the profit will decrease when the cost of financing or interest increases.(3). With the increasing of loan-to-valuation ratio, the amount of order and production will increase, but the profit will decrease.(4). The risk attitude can affect the efficiency of logistics financing, the financing amount, production amount and profit will decrease with risk aversion seller or manufacturer.The main innovations of this paper include:(1). This thesis examine joint financing, production and inventory decisions with order financing and inventory financing.(2). We incorporate the cost of financing into the constraints and objective function, and examine the impact of the cost on decisions.(3). This thesis incorporate a constraint on profit margin and an objective function to maximize profit margin into the model.(4). We consider the seller’s and manufacturer’s risk attitude in the models, and examine the impacts of risk attitude on the decisions.Based on the practice, we provide decision models and managerial insights for manufacturer and seller, which can help decision makers to made right decisions, and help them to understand the impact of the parameters on decisions. Our research also provides new findings for logistics financing, which can provides a theoretical basis for the further study.