Payment Schemes And Incentive Analysis In Supply Chains Under Different Pricing Power Structures

Against the background of the government’s strong promotion of powerful enterprises to quickly pay off small and medium-sized enterprise(SME)debts,to solve the latter’s cash flow difficulties,this thesis delves into the competition and cooperation game between upstream and downstream firms in the supply chain,starting from three common pricing power structures.The feasible conditions for powerful firms to be willing to pay off debts quickly are obtained,and the operating mechanisms of several key influencing factors are discussed.This provides valuable management insights for improving supply chain performance and government policy making.The specific research content and main conclusions are summarized as follows:(1)Under the supply chain power structure in which downstream is a powerful retailer and upstream is a weak supplier: Based on the agricultural supply chain in which Walmart participates,this thesis investigates the production decision of competitive agricultural product suppliers with heterogeneous product quality and the motivation of powerful retailers to pay product payments without delay.If downstream powerful retailers introduce blockchain systems in the supply chain to avoid the cost of sudden bacterial contamination of agricultural products,smart contract real-time payment technology will be introduced as an inducement for suppliers to cooperate in joining the blockchain system.This thesis found that both powerful retailers and suppliers providing high-quality products have the motivation to join the blockchain system,showing the "self-proving effect of high-quality products",while suppliers providing lower quality products are only willing to join the blockchain system conditionally.Real-time payment by retailers does not necessarily enhance the motivation for suppliers to join the blockchain system,as real-time payment results in downstream powerful retailers bearing the opportunity cost of payment funds,resulting in lower purchase prices for downstream retailers.This harms the willingness of upstream suppliers to increase investment and expand production,leading to a loss of efficiency in the entire supply chain system.(2)Under the supply chain structure in which downstream is a weak retailer and upstream is a powerful multinational firm: Based on Procter & Gamble’s cross-border distribution supply chain,the study investigates a "one-to-two" competitive channel system consisting of upstream manufacturing subsidiaries of multinational firms,downstream retail subsidiaries of multinational firms,and weak third-party retailers.There is corporate income tax planning between the manufacturing and retail subsidiaries of multinational firms which forms a unique “semi-centralized-semi-decentralized” decision structure.The procurement costs of third-party retailers are constrained by cross-border“Arm’s Length Principle”.Due to the cumbersome flow procedures of cross-border trade funds,multinational firms have a long accounts receivable turnover period.This thesis analyzes whether powerful multinational firms have the motivation to introduce real-time payment technology to shorten the accounts receivable turnover period and reduce the opportunity cost of funds in this trade context.The study found that multinational firms may not benefit from real-time payment,while weak retailers may conditionally cooperate with upstream MNF’s real-time payment arrangements.The preferences of retail subsidiaries and weak local retailers for real-time payment are not consistent,and whether retailers benefit depends on the intensity of competition,cross-border tax rate differences,and relative opportunity costs of funds.This thesis separates two important decisionmaking power effects,namely,the "opportunity cost reduction effect" and the "time value transfer effect",which can effectively measure the decision-making balance of multinational firms on whether to adopt a real-time payment strategy.(3)Under the supply chain structure with relatively equal pricing power between upstream and downstream firms: Based on the clothing supply chain of Walmart and Li &Fung,this thesis investigates the impact of payment timing differences on the outsourcing strategies of procurement and logistics services in the supply chain.Weak upstream suppliers provide raw materials to powerful multinational retailers(such as Walmart)and relatively powerful logistics service providers(such as Li & Fung),while the logistics service providers offer logistics and quality inspection services to the retailers.If the retailer outsources its procurement function services to the logistics service provider(referred as Bundled Outsourcing Strategy),the payment between the two is short-term payment.If the retailer is responsible for material procurement on its own(referred as Individual Outsourcing Strategy),the payment between it and the supplier is long-term payment.The thesis found that the logistics service provider actually incurs losses under the Bundled Outsourcing Strategy.Similarly,only when the retailer’s channel advantage is large,and the bargaining power of the retailer and the logistics service provider relative to the weak upstream supplier is close,and the bargaining power of the retailer relative to the logistics service provider is large,will the retailer prefer the Bundled Outsourcing Strategy.Otherwise,the retailer may also incur losses due to outsourcing procurement.The thesis also found that there is a huge difference in profit distribution among supply chain members when alternative suppliers exist in the supply chain.