Financing Multiple Heterogeneous Suppliers in Assembly Systems: Buyer Finance vs. Bank Finance

Deng, Shuai; Gu, Chaocheng; Cai, Gangshu; Li, Yanhai

doi:10.1287/msom.2017.0677

Cited by 149 publications

(99 citation statements)

References 30 publications

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“…The CS sells key components to the CCM at a wholesale price, which is defined as an “indirect‐selling channel,” and simultaneously sells the final products to the consumer market under its brand, which is defined as “direct‐selling channel.” The CCM procures components from the CS and sells the final products to consumers under its brand. We assume that, without loss of generality, the CCM and CS use a unit component to assemble the final product of a unit (Autrey et al., ; Deng et al., ). Furthermore, we standardize the production cost of the CS and CCM to zero.…”

Section: Model Formulationmentioning

confidence: 99%

Financing strategies for a capital‐constrained manufacturer in a dual‐channel supply chain

Xiao

2019

Int Trans Operational Res

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This study investigates a co-opetition-type dual-channel supply chain that consists of a competitive supplier (CS) and a capital-constrained manufacturer (CCM). The CCM procures key components from and simultaneously competes with the CS in the consumer market. To address the CCM's capital constraint, we consider three financing strategies, namely, trade credit, bank loan, and hybrid financing (i.e., combined use of bank loan and equity financing). Game models are established to characterize the interactions between the CS and CCM. The corresponding equilibria are derived under each strategy. Then, comparative analyses are conducted, and the CS's and CCM's preference structures regarding the three strategies are revealed. On this basis, the equilibrium strategy can be concluded as either trade credit or hybrid financing, but never bank loan. Specifically, when the equity financing ratio is small or large, trade credit is an equilibrium strategy. When the equity financing ratio is medium, the equilibrium strategy between trade credit and hybrid financing is determined by consumers' product preference and loan interest rate.accounted for a combined shipping volume of over 533 million units in 2017. This value is equivalent to 36.3% of the global smartphone market. 2 Although the two companies are in fierce competition in their industry, they cooperate with each other in many areas. 3 Notably, Samsung has provided Apple with processors and OLED screens for many years. 4 Such "co-opetition" is prevalent in many high-technology industries. Other typical examples are IBM and Cisco. The former purchases network equipment from the latter, while simultaneously competing in the overall server market. 5 The dual-channel supply chain, in which a supplier provides a manufacturer with key components while the two companies compete with each other in the final market, is common in real businesses. However, in practice, certain manufacturers in such dual-channel supply chains may lack capital to support production. For example, the smartphone screens used by Gionee, a well-known smartphone manufacturer in China, have always been provided by Foxconn. However, in recent years, Gionee has encountered capital-shortage problems and sought financing instruments to support its production. Consequently, one of the critical challenges for Gionee is selecting a suitable financing strategy.Accordingly, we extend the current literature by examining a co-opetition-type dual-channel supply chain, which consists of a competitive supplier (CS) and a capital-constrained manufacturer (CCM). The two firms are cooperative in component supply but competitive in the consumer market. Specifically, the CCM procures components from the CS. Meanwhile, the two companies compete by selling substitutable products in the same consumer market. For the capital constraint of the CCM, we consider three financing strategies. In Strategy 1 (trade credit), the CS offers trade credit to the CCM. In Strategy 2 (bank loan), the CCM seeks a bank loan to support its ...

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Section: Model Formulationmentioning

confidence: 99%

Financing strategies for a capital‐constrained manufacturer in a dual‐channel supply chain

Xiao

2019

Int Trans Operational Res

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“…Four papers in the special issue study problems related to the use of trade credit or buyer financing: , Deng et al (2018), Lee et al (2018), andTang et al (2018). The popularity of this topic is not surprising, in light of the fact that trade credit and buyer financing requires deep understanding of supply chains, procurement contracting, and financial contracting.…”

Section: Overarching Themesmentioning

confidence: 99%

“…The paper "Financing Multiple Heterogeneous Suppliers in Assembly Systems: Buyer vs. Bank Finance" (Deng et al 2018) asks the following question: Should different players in an assembly system (one assembler sourcing from multiple suppliers) be financed by bank loans or by buyer-led financing services? It is quite common in the automotive and aerospace industry for strong end-product market manufacturers to pay early or to provide loans to their suppliers to alleviate financial hardship in dealing with financing their purchase orders.…”

mentioning

confidence: 99%

Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

Babich

Kouvelis

2018

M&SOM

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Abstract. Interface of finance, operations, and risk management (iFORM) is a relatively new research area dealing with timely, complex, and boundary-spanning issues in a variety of settings from start-ups to global enterprises. iFORM research addresses ways to better integrate physical, financial, and informational flows by combining the operational choices of the firm with its financial decisions, and merging information flows between the firm and its customers and suppliers with informational flows between the firm and its investors. We report on the main research themes of the recent iFORM research, based on, and going beyond, papers that appeared in the Manufacturing and Service Operations Management iFORM special issue. We highlight the main emerging contributions in the area. Among the most frequently addressed issues in current research include the following: supply chain finance, such as trade credit and buyer-intermediated finance and their effects on supply chain performance; agency problems, such as risk shifting and managerial short-termism and their influence on operational decisions; contracting between the firm and its investors and how it alters contracting with supply chain partners; and supply risk management in the form of dealing with commodity price fluctuations and supplier performance issues. We suggest four promising directions of future iFORM research: supply chain finance, integrated risk management, start-up and entrepreneurial financing, and asset pricing with supply chains.

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“…Peura et al [16] illustrate that trade credit can benefit suppliers through horizontal channels. Deng et al [17] consider multiple heterogeneous capital-constrained component suppliers and characterize the equilibrium solutions under buyer finance, bank finance and no finance. Lee et al [18] study how trade credit responds to various types of competition in supply chains, as well as the impact of trade credit on firm performance.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In the Stackelberg game, the retailer's order quantity q b 1 (w) can be regarded as the function of the supplier wholesale price w. Consider the first-order optimal condition of π b 1 (q 1 ), let G denote Equation (17) and find the partial derivatives of G with respect to q b 1 and w, respectively:…”

Section: Single-period Bank Financing Problemmentioning

confidence: 99%

Research on Trade Credit and Bank Credit Based on Dynamic Inventory

Lei

Yang

2019

Sustainability

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Trade credit is a short-term business financing based on purchases between the retailer and the supplier. This paper considers a supply chain consisting of a well-funded supplier and a capital-constrained retailer. At the beginning of each sales season, the retailer need to place an order from the supplier to meet the stochastic demand. The capital-constrained retailer determines the order quantity and whether to borrow loans from a bank or the supplier or just use its initial capital, according to its finance and stock status with the wholesale price provided by the supplier. We build the Stackelberg game with the supplier as the leader and divide the retailer’s initial inventory and capital into different wealth regions to discuss the optimal strategies of different wealth regions. We extend to the two-period dynamic financing model based on dynamic inventory and capital flow so as to obtain the optimal strategy matrix of the retailer and the supplier under bank and trade credit. Numerical results validate our theoretical analysis of bank credit and supplier credit with dynamic inventory under different period setting.

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Financing Multiple Heterogeneous Suppliers in Assembly Systems: Buyer Finance vs. Bank Finance

Cited by 149 publications

References 30 publications

Financing strategies for a capital‐constrained manufacturer in a dual‐channel supply chain

Financing strategies for a capital‐constrained manufacturer in a dual‐channel supply chain

Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

Research on Trade Credit and Bank Credit Based on Dynamic Inventory

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