Research On Financing And Operational Strategies For Capital-Constrained Supply Chains

Financial constraint is one of the obstacles that hinder effective supply chain operation.The supplier's financial constraint may lead to unsmooth production or late delivery,which means supply shortages or supply disruption for the downstream firm;and the financial constraint of the downstream enterprise can yield lost sales and customers.In order to release financial constraint,trade credit and bank financing are commonly used.Trade credit,including delayed payment and advance payment,is the business credit between supply chain enterprises or between supply chain enterprises and their customers.Bank financing means the enterprise obtains credit from banks directly to make up the lack of funds.The research on financing and operations strategies for financial constrained supply chain has important theoretical and practical values.We firstly address the optimal ordering decision for supply chain members when unilateral trade credit or bilateral trade credit is used;and analyze the influences of upstream enterprise's financial constraints on operational decisions.Then we discuss the financing role of advance payment and its advantages compared to bank financing when the supplier is financial constrained.We further design supply chain coordination mechanism based on advance payment.Finally,we explore the supply chain members' operational decisions and the bank's decision on interest rate when the financial constrained downstream firm has two order opportunities and bankruptcy risks.This thesis consists of six chapters.In the first chapter,we describe the background and contributions of this thesis.In the second chapter,we summarizes relevant literatures.In chapter three,we discuss the ordering decisions under unilateral and bilateral trade credit.with different ways of account settlement.In the previous literature,only the payment time of trade credit,is considered,i.e.,trade credit is divided into delayed payment and advance payment;while in this thesis,we also consider the ways of account settling of unilateral and bilateral trade credit,including continuous account settling and non-installment account settling.In specific,we discuss the ordering policy and the corresponding profits for six kinds of account settling trade credit,i.e.,continuous cash on delivery,continuous delayed payment,continuous advance payment,noninstallment cash on delivery,noninstallment delayed payment and noninstallment advance payment.We further compare the supply chain's optimal ordering decision and the member enterprises' optimal profits under different ways of account settling of trade credit.The results show that:(1)the supply chain's optimal ordering decision is independent on the customer's time of trade credit,but is related to the product's selling price under all kinds of trade credit;(2)the supply chain's optimal ordering quantity is larger than the classic economic order quantity when the product's selling price and wholesale price meet certain conditions;(3)the customer's noninstallment advance payment trade credit is better than the other trade credit in enlarging the supply chain's ordering quantity.In chapter four,we address the advance payment financing strategy and the supply chain coordination mechanism for financial constrained upstream enterprise.We consider a supply chain composed of a retailer and a supplier where the supplier is financial constrained.The influences of the supplier's financial constraint are analyzed and the retailer's advance payment is proposed to eliminate the influence of the supplier's financial constraint.The results show that the retailer can stimulate the supplier to improve production quantity via advance payment.However,the advance payment cannot make the supply chain achieve maximized profit.Based on the above results,we propose a supply chain coordination mechanism by combining advance payment and traditional supply chain contract,where the retailer's advance payment guarantees sufficient funds for the supplier and the traditional contract make the supply chain coordinated.The proposed mechanism is also flexible to achieve Pareto improvement for both parties.Our results show that the advance payment with buy back contract and the advance payment with revenue-sharing contract can achieve supply chain coordination under certain conditions.In chapter five,we study the financing and operational strategies of financial constrained supply chain by considering the downstream firm's bankruptcy costs and two ordering opportunities.We propose a dynamic game model where a supplier offers advance order discount to a financial constrained retailer facing stochastic demand.The retailer might need to obtain a loan from a bank to pay the supplier to execute the advance order.The supplier makes decisions about production quantity to fulfill the two orders which might be proposed by the retailer.At the start of sales period,the retailer needs to repay the loan and interest by the revenue from advance order sales;if the loan cannot be repaid,the retailer will announce bankruptcy,and the revenue would all belong to the bank,who needs to pay the retailer's bankruptcy costs,including fixed cost and variable cost.If the retailer can repay the loan,then he can use his funds to proceed the second order to meet extra demand.Through the model,we find that the supplier's production decision and retailer's ordering decision are determined by the wholesale price,price discount and the retailer's initial working capital.We further study the influence of retailer's initial level of working capital on the retailer's ordering decision,the supplier's production quantity decision and the bank's interest rate decision.The results show that the retailer tends not to order before sales period,and to satisfy demand only by using his working capital to proceed the second ordering;and the supplier's optimal production quantity decision equals to the order quantity derived by the classic newsvendor model.Further,if the retailer does not preorder and only use his working capital to proceed the second order,the supplier's optimal production decision equals to the retailer's purchasing quantity by his working capital.The sixth chapter summarizes the conclusions of the thesis and points out the shortcomings and the future research directions.The main contributions of the thesis are as follows:(1)We reveal the advance payment's financing function and its role in improving the efficiency of capital constrained supply chain.We derive the Pareto improving space of supply chain and the coordination function of advance payment for capital constrained supply chain.Most of the previous literatures focuse on the case when the downstream enterprises have capital bottlenecks and the seldom research considers the upstream enterprise's financial constraint,especially when the upstream enterprise has zero capital.This thesis fills the gap and studies the financing mode selection when the upstream firm's funds is zero.We also discuss the role of the advance payment in improving both enterprises' profits and the supply chain efficiency when the upstream enterprise has certain quantity of capital but the capital is not sufficient to support its production.(2)We design the supply chain coordinating mechanism based on advance payment and derive the conditions of coordinating supply chain operation,which extends the current research about advance payment.The previous literatures about advance payment mainly focused on the advance payment's influences on the operational decisions.Some papers also discussed the comparison of operational decisions and supply chain enterprises' interests under advance payment and traditional newsvendor model.However,the study of supply chain coordination for capital constrained upstream enterprises is not sufficient.This thesis proposes supply chain coordination mechanism based on advance payment and other contracts.The conditions of coordinating pull supply chain by combinating advance payment and other contracts are analyzed,i.e.,the conditions that the effectiveness under centralized decision case can be achieved under decentralized decision case and channel profit can be allocated arbitrarily.(3)We analyze the impacts of unilateral and bilateral trade credits on supply chain decisions and profits,and the previous research on supply chain operations under the bilateral trade credit is not sufficient.Most of the previous literatures analyzed the issues when the supplier provides delayed payment for the retailer.The studies on the downstream firm's advance payment or the upstream firm's capital constraint are not sufficient.This thesis analyzes and proves the impact to supply chain enterprises' optimal inventory decision and supply chain channel interest by supply chain customer's trade credit mode under deterministic demand,the customer's trade credit is divided into continuous mode and noninstallment mode according to methods of settling account,and divided into cash on delivery,delay in payment and advance payment according to payment time,and supply chain system's optimal ordering decision and supply chain enterprises' optimal profit are analyzed based on the six unilateral trade credit;the impact to supply chain's optimal operation decisions by the trade credit modes based on downstream enterprise's advance payment and customer's different methods of settling account,i.e.bilateral trade credit are discussed,and optimal ordering decision and supply chain enterprises' optimal profits are solved.(4)We derive the supply chain members' optimal operational decisions under the existence of bankruptcy costs and two ordering opportunities and reveal the influences of enterprise's working capital and bank's bankruptcy costs on supply chain members' operational decisions and bank's interest rate decision.The previous literatures consider the influences of bankruptcy risks and bankruptcy costs on the enterprises' operational decisions mainly based on the one order problems,and the two ordering opportunities situation is seldom considered.This thesis considers the supply chain downstream enterprise's bankruptcy risks due to finance from a bank because of insufficient capital,and considers bankruptcy costs caused by the procedure of bankruptcy,and considers the influences to supply chain member enterprises' decisions by two-order arrangement,and supply chain member enterprises' optimal decisions when bankruptcy costs and two-order opportunity exist,which makes up the shortcomings in previous researches.