Working Capital Financing in Reverse Supply Chains – New Perspectives (Auto-Financing)

Abstract

Competition among Global Supply Chains has been studied intensively in recent years. While forward supply chains strategies such as supply chain or operational redesign were studied often, for reverse logistics most development strategies represented a new direction of research, especially regarding Supply Chain Finance domain. This paper explains how a reverse supply chain can obtain finances for its daily activities in its sorting phase by using a linear model based on penalties for the working capital issue. Here, traditional working capital financing (obtained normally from a financial institution) is replaced by a new production model, resulting in daily activities financing from another actor of the reverse logistics. In this case, the working capital provider is no longer a financial institution, but the original raw material provider. This approach gives a new perspective about finances in a supply chain hence it does not add more financial constraints for companies, and helps in the same time the whole supply chain from an operational point of view. As a result, the manufacture company has less financial constraints, the sorting process improves significantly both in financial and non-financial terms, and the overall supply chain is more competitive on the market.