The Research On The Ordering And Financing Decisions Of Capital-Constrained Newsvendor Under Two Ordering Opportunities

Small and medium-sized enterprises (SMEs) occupies the most in the global economy, and play important roles in the economy and employment. However, SMEs or start-ups face a universal problem that is working capital is very limited, which influences the optimal management decision-making and operations efficiency, such as the production plan, ordering and advertising decisions. Conversely, it also affects the performance of the economy, such as investment, employment and consumer welfare. Therefore, how to solve the problem attracts the attention of managers, scholars and policymakers. As the most popular sources of financing, bank financing has been already well analyzed from the perspective of finance. However, in developing countries, due to the potential credit risk the majority of SMEs find it hard to obtain commercial loans from the financial market. In such case, trade credit appears as a financial channel. It is of great significance to the growth potential, competitive advantage and survival of the company. Then the trade credit gradually become an important source of the enterprises’ short-term financing.Based on the background, this paper incorporates two-ordering opportunities and the capital constraint into Stackelberg problem under bank credit and trade credit respectively, to focus on the interface of operations and finance. It mainly involves the following two aspects, (ⅰ) the optimal ordering decision and financial decision; (ⅱ) the effects of parameters, such as reorder quantity threshold, reorder price on the supply chain members’ decision-making. In order to investigate the above problems, the paper considers two games. The first is the Stackelberg game between a well-funded bank and a capital-constrained newsvendor (retailer). The bank is the leader and decides the loan rate. Then the retailer determines the optimal ordering quantity as a follower. The retailer is allowed to order a single perishable product twice with the constraint of reorder quantity threshold. The retailer sells the product at a fixed retail price in a random market. Stackelberg Equilibrium between retailers and bank is derived, i.e., obtaining the retailer’s optimal order quantity and the bank’s optimal loan rate. The analysis of model shows that, the reorder price and the reorder quantity threshold have a significant impact on the newsvendor’s optimal decision and bankruptcy risk. At the same time, the retailer’s ordering decision also affects the optimal loan rate. We extend the model under perfectly competitive capital market. We find that the performance of the newsvendor is the same to the ordering decision without capital constraint. Then we discuss the Stackelberg game between a capital-constrained newsvendor (retailer) and a capital-sufficient supplier under a trade credit contract. In this game, the supplier encourage newsboy to order twice, and offers an unlimited credit to it. As the leader, the supplier firstly decides the optimal credit rate and the reorder quantity threshold. Then the retailer as the follower decides the optimal order quantity. Different from the bank credit model, the supplier provides a trade credit contract and sells products at the same time. The selling profit is added to the supplier’s final profit. Ultimately we obtained the game results where they both reach the optimal expected profits. We find that the trade credit contract has a tacit coordination on the supply chain under capital constraint. Considering the final outcomes of two games, we find that the reorder quantity threshold and loan rate have significant impact on the retailer’s optimal decision. Meanwhile, two ordering opportunities, bank financing/trade credit can mitigate the adverse effects of financial constraints on the retailers and consequently they create more value for the whole supply chain and coordinate it.