Supporting small suppliers through buyer-backed purchase order financing

Huang, Boray; Wu, Andy; Chiang, David Ming-Huang

doi:10.1080/00207543.2018.1454614

Cited by 31 publications

(6 citation statements)

References 51 publications

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“…Hosseini et al (2019) explored the resilient supplier selection process under disruption risks. Undoubtedly, the supplier selection stage is a good starting point to model the impact of financial risk on the supply chain and further explore the relationship between the manufacturer and supplier (Huang, Wu, and Chiang 2018). A robust supply chain is of high importance for the financial stability and sustainability of associated businesses.…”

Section: Impact Of Financial Risk On Supply Chain Stakeholdersmentioning

confidence: 99%

Impact of financial risk on supply chains: a manufacturer-supplier relational perspective

Ghadge

Jena

Kamble

et al. 2020

International Journal of Production Research

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This study aims to analyse the manufacturer-supplier relational perspective under the influence of exogenous financial risk. Following corporate finance theory, a multi-objective decision model for supplier selection and order allocation is developed to maximise the total profit of the manufacturer, and minimise the implicit equity stake and financial risk faced by selected suppliers. A two-echelon supply chain is explored under the influence of foreign exchange risk, default risk, market risk and price fluctuation risk, and solved using an NSGA-III algorithm. Three case scenarios are analysed to explore the influence of a set of financial risk on the manufacturer-supplier relationship and the behaviour of suppliers concerning risk profile, both in the short and long-term horizon. The results are analysed from both the manufacturer as well as supplier perspective, and the optimal conditions are discussed under the cascading risk circumstances. The study provides multiple insights into the impact of financial risk on supply chain relationship and will be valuable for dealing with similar uncertain economic environment. The research is likely to be of benefit beyond supply chain managers, like investors and financial risk managers in making informed decisions. The need to focus on systemic risk in supply chains is evident from the study.

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Section: Impact Of Financial Risk On Supply Chain Stakeholdersmentioning

confidence: 99%

Impact of financial risk on supply chains: a manufacturer-supplier relational perspective

Ghadge

Jena

Kamble

et al. 2020

International Journal of Production Research

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show abstract

“…Relative to the PCG by the core enterprise, Shi et al [8] analyzed the guarantee mechanism from the perspective of the core enterprise's buyback and confirmed the substitutability of these two financing guarantee mechanisms by comparing them with the research of Yan et al [11]. Moreover, Huang et al [35] and Tunca and Zhu [15] pointed out that buyer PCG can reduce the financing risk of banks, thus facilitating loan applications and improving the financing efficiency of SMEs.…”

Section: Literature Reviewmentioning

confidence: 99%

Guarantee Mechanism in Accounts Receivable Financing with Demand Uncertainty

Zhao

2023

Sustainability

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With respect to a two-echelon supply chain comprised of a retailer and a capital-constrained supplier, this paper investigates the effect of guarantee on accounts receivable financing with the consideration of retailer’s default risk and three guarantee scenarios: no guarantee, third-party offers partial credit guarantee (PCG), and supply chain management company (SCMC) offers repurchase guarantee. By a Stackelberg game model, the study finds that: when the third-party offer PCG, the retailer that bears the guarantee fee is more beneficial than when the supplier bears the guarantee fee. The supplier’s profit still increases with the PCG coefficient even when the supplier bears the guarantee fee. In addition, when SCMC offers a repurchase guarantee, the optimal interest with which the bank provides financing to SCMC is unaffected by the retailer’s default and can reduce the optimal interest with which SCMC provides financing to the supplier. From the perspective of the capital-constrained supplier, the study finds that the optimal guarantee mechanism in accounts receivable financing could switch from SCMC offers repurchase guarantee to retailer offers PCG or third-party offers PCG where the retailer bears the guarantee fee with the increase in the PCG coefficient. Finally, some numerical experiments are conducted to verify the results of this research. The findings in this paper can offer financing insights into the guarantee mechanism in accounts receivable financing.

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“…The pre-shipment SCF solutions, such as purchase order financing, can help the SMEs to arrange capital for their operations based on the purchase order received from the buyer. A purchase order from a creditworthy buyer is a key ingredient in assuring the finance provider about the ability of the seller to perform under the contract with buyer (Huang et al ., 2018).…”

Section: How Scf Is An Antidote To Smes In Economic Crisis: a Theoret...mentioning

confidence: 99%

Is supply chain finance an antidote to SMEs in the economic crisis? - A qualitative inquiry

Kaur

Kumar

Joshi

2023

IJLM

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PurposeThis exploratory study aims to explore the operational and financial constraints faced by small and medium enterprises (SMEs) in India during the COVID-19 pandemic. The paper highlights the role of supply chain finance (SCF) in the uncertain business environment caused by the pandemic.Design/methodology/approachThe study adopts an inductive approach and conducts convergent interviews with 32 SME owners and bank officials who are associated with SME-related financial transactions. The analysis of the interview data has been done through a grounded theory approach.FindingsThe findings portray four key themes representing the operational and financial constraints faced by SMEs during the pandemic. Further, the study identifies four drivers of SCF adoption among SMEs, including capital constraints, high inventory turnover cycle time, high order fulfilment cycle time and long debtors’ collection period.Practical implicationsThe study provides various insights to the managers and owners of SMEs to deal with the economic crisis and eliminate the financial pressure created by the pandemic. The study enlightens the policymakers about the struggles of the SMEs during the economic turmoil created by the pandemic and guides them to introduce the relevant policies to resolve their problems.Originality/valueTo the best of the authors’ knowledge, this is the first study to identify the factors driving the SMEs to adopt SCF due to the economic chaos created by the pandemic. Also, the study theoretically contributes to the literature by developing a theoretical framework for SCF adoption based on grounded theory.

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Supporting small suppliers through buyer-backed purchase order financing

Cited by 31 publications

References 51 publications

Impact of financial risk on supply chains: a manufacturer-supplier relational perspective

Impact of financial risk on supply chains: a manufacturer-supplier relational perspective

Guarantee Mechanism in Accounts Receivable Financing with Demand Uncertainty

Is supply chain finance an antidote to SMEs in the economic crisis? - A qualitative inquiry

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