Supply chain financing with advance selling under disruption

Gupta, Varun; Chutani, Anshuman

doi:10.1111/itor.12663

Cited by 46 publications

(30 citation statements)

References 37 publications

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“…This is especially true when we have disruptions (Ivanov et al., 2017). Gupta and Chutani (2020) study the supply chain financing challenge with the considerations of supply disruptions. The authors investigate the scenario in which the retailer can “finance the supplier using advance selling.” They uncover that the advance selling scheme can be used to mitigate the negative influences brought by supply disruptions, which further helps improve supply chain profitability.…”

Section: Or Models For Supply Chain Financementioning

confidence: 99%

Editorial to the Special Issue onOperations Research Models for Supply Chain Finance

Choi

Ivanov

2020

Int Trans Operational Res

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Section: Or Models For Supply Chain Financementioning

confidence: 99%

Editorial to the Special Issue onOperations Research Models for Supply Chain Finance

Choi

Ivanov

2020

Int Trans Operational Res

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“…The topic of financing as value‐added terms offered within supply chain members toward their upstream or downstream counterparts has also been addressed. Some studies have considered trade credit, guarantee, or equity investment offered by the seller to mitigate the buyer's financial constraints and to share market risk (Li et al., 2020; Li and Jiang, 2020; Qin et al., 2020; Yan et al., 2019); and others have considered advance selling prior to production or delivery of the product offered by the buyer to the seller (Gupta and Chutani, 2020; Shen et al., 2020). Kouvelis and Zhao (2015) investigated a scenario in which both supplier and retailer seek external financing and examined the contracts that could coordinate the channel.…”

Section: Literature Reviewmentioning

confidence: 99%

How does a bank's involvement interplay with a firm's capacity investment? An analysis and comparison of different consortium structures

Wang

Wen

Yip

et al. 2020

Int Trans Operational Res

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As nonrecourse project finance (rather than financing on a sovereign basis) is becoming more prevalent worldwide, financing institutions have to collaborate more closely with firms to optimize capacity-investment and financing decisions. Under this background, this paper presents a stylized Stackelberg games model, taking into account the firm's capacity investment as well as the bank's interest rate and funding ratio decisions. Consortium structures between bank and firm are formalized into five modes based on industry practice, namely, the integrated consortium, pure shareholder funding, bank as leader, full coordination, and bank as follower. The optimality and equilibrium of each of the five modes are analytically derived, and their existence and uniqueness are demonstrated. Valuable economic insights are obtained through both modeling analysis and numerical experiments, with the main findings including the following: (i) a lack of bank financing leads to insufficient capacity investment and poor consortium performance; (ii) interest rate and funding ratio play important but different roles in the bank's risk management; (iii) the bank's proactivity in leading and coordinating the consortium is critical for the two parties' overall performance; and (iv) if the bank is the follower, the firm's capacity decision is irrelevant to the bank's loan contract, and the consortium cannot be coordinated to the first-best level of performance.

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“…Liu and Wang () explore the SCF problem considering the risk of commodity price as well as the exchange rate. Gupta and Chutani () study the financing problem in a presell supply chain considering the mitigation of presell on disruption. Although our work studies the optimization problems in SCF as well, we differently explore the problem in a fashion MC supply chain.…”

Section: Literature Reviewmentioning

confidence: 99%

Influences of supply chain finance on the mass customization program: risk attitudes and cash flow shortage

Guo

Liu

2019

Int Trans Operational Res

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In recent years, to satisfy diversified customer needs in the target market, an increasing number of brands have launched mass customization (MC) programs as one of their core operations strategies. The production process flexibility and personalization degree of customized products (i.e., the MC products) have thus become key to the success of MC schemes. In the meantime, however, considering the high market uncertainty in consumer preferences and the challenges from the production process, there are plenty of risks in MC operations. Hence, in this paper we develop a game-theoretic model consisting of an MC brand and an upstream manufacturer to identify the influences of supply chain finance (SCF) on MC programs. The influences brought by the risk attitudes of both MC brand and manufacturer are analyzed. Besides, an extra interest rate for raising the working capital for production (e.g., from the bank) at the manufacturing level is also considered in this paper to address the impact of cash flow shortage. We find that when the positive sensitivity of the market demand with respect to the modularity level of the MC product is sufficiently high, the optimal product modularity level of the MC product increases with the MC brand's degree of risk averse. In addition, it can also be observed that when both the market demand's positive sensitivity to the modularity level of the MC product and the MC brand's opportunity cost rate for placing the advance order are sufficiently high, any increase in the risk-averse degree of the MC brand or the manufacturer will lower the manufacturer's optimal wholesale price of the MC product as well as the MC brand's optimal rate of the advance order. Furthermore, the higher the interest that the manufacturer needs to pay (such as to the bank) for raising the working capital for the MC production process, the lower the optimal wholesale price of each finished MC product will be to help the manufacturer raise more money through the advance order placed by the MC brand. These observations complete the findings in the extant literature and provide important managerial insights into managing MC operations.

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Supply chain financing with advance selling under disruption

Cited by 46 publications

References 37 publications

Editorial to the Special Issue onOperations Research Models for Supply Chain Finance

Editorial to the Special Issue onOperations Research Models for Supply Chain Finance

How does a bank's involvement interplay with a firm's capacity investment? An analysis and comparison of different consortium structures

Influences of supply chain finance on the mass customization program: risk attitudes and cash flow shortage

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