Research On Financing Strategy In Supply Chain Finance

Financial shortage heavily depresses the development of small and medium sized enterprises within the advancement of economic society.Bank financing and trade credit financing are the two widely used financing sources worldwide.However,it becomes difficult for the small and medium sized enterprises to obtain bank loans since they do not own sufficient collaterals,and the increasing financing cost caused by market friction also exacerbates that process.Considering all above challenges,this study analyzes the equilibrium financing strategy from three aspects:the implementation of credit insurance in bank financing,the impact of monitoring cost(a kind of market friction)on the supply chain finance and the practice of the supplier’s debt-sharing applied in bank financing.Firstly,the equilibrium financing strategies are studied.Based on the classic newsvendor model,a system consists of a capital-constrained manufacturer(newsvendor),an insurer and a bank is established,where the manufacturer can freely use selffinancing,bank financing or insurance-based bank financing(with bank loan limit is improved).The profit-maximizing bank sets the loan interest rate,whereas the insurer in the competitve marktet decides the insurance premium;and then,the manufacturer decides the production quantity,insurance coverage and financing source.Among the equilibriums in three financing schemes,we find that:(1)the severely poor manufacturer prefers insurance-based bank financing;(2)the medium poor manufacturer uses bank financing unbounded with credit limit;(3)the rich manufacturer adopts selffinancing.The bank sets different rates for the severely poor manufacturer and the moderately poor manufacturer,respectively.Computational studies show that the severely poor manufacturer will overproduce,and the severely poor manufacturer’s profit under bank financing is equivalent to that under insurance-based bank financing.Secondly,the equilibrium financing strategies between supplier financing and bank financing in the presence of monitoring costs are studied.Based on the classic selling to the newsvendor model,the dominant supplier offers a supply contract including a wholesale price and a supplier financing interest rate,and the capital-constrained retailer can freely use slef-financing,competitvely priced bank financing or supplier financing.The creditor(bank or supplier)needs to pay monitoring cost for managing the generated receivable.Among all the financing equilbriums,we find that:(1)When only bank financing is variable,the presence of bank’s monitoring cost induces the severely poor retailer to use bank financing,and the classification of severely poor depends on the bank’s monitoring cost;(2)When only supplier financing is variable,the supplier of lower monitoring cost always offers supplier financing with interest rate equals riskfree rate to the not severely rich retailer;(3)When both bank financing and supplier financing are exist,the efficient supplier(the supplier’s monitoring cost is lower than a threshold)offers supplier financing with interest rate equals risk-free rate to the not severely rich retailer;otherwise,the retailer uses either bank financing or self-financing,depending on the bank’s monitoring cost and the retailer’s initial capital;(4)There exists a supplier’s monitoring distortion region,and the supplier-dominant chain inside the region suffers a efficiency loss.Finally,the financial and operational strategies with the supplier-indirect financing under newly bank financing(debt-shared bank financing)are studied.Based on the classic selling to the newsvendor model,the dominant supplier offers a relaxed debtshared contract,where the capital-consatrained retailer can freely use self-financing,competitively priced bank financing or debt-shared bank financing.Among the three financing equilibriums,we find when the retailer is traditionally capital-constrained,the supplier always offers debt-shared bank financing with the wholesale price equals the retail price;otherwise,the supplier offers either an optimally designed debt-shared bank financing contract or an optimal price-only contract at benefits.Compared to the price-only contract,the debt-shared bank financing contract improves the supplier’s profitability and the supply chain performance.Computational studies show that the supplier always offers debt-shared bank financing to the not very rich retailer,whereas the very rich retailer uses self-financing.The not very rich retailer’s profit is a bowlshaped function of initial capital,and the supplier achieves globally optimal profit in the debt-sharing hole.