no. 3
Mixed financing modes for capital-constrained supply chain with risk-averse members
RAIRO. Operations Research, Tome 56 (2022) no. 3, pp. 1223-1258

This paper considers a two-echelon supply chain consisting of a supplier and a capital-constrained retailer. Both the supplier and the retailer are risk-averse decision makers. The capital-constrained retailer may adopt two mixed financing modes: (1) bank credit and equity financing (BEF) and (2) trade credit and equity financing (TEF). Using a mean-variance framework, we analyze the supply chain members financing and ordering decisions in two cases: symmetric and asymmetric retailer risk aversion threshold information. In the case of symmetric information, we characterize the conditions under which both the supplier and the retailer prefer BEF or TEF. In the case of asymmetric information, we demonstrate that the retailer has an incentive to pretend to be less risk averse. To prevent this distortion behavior, we design a minimum quantity contract for the supplier. Finally, we extend our model to a bank loan-trade credit-equity mixed financing mode (BTEF) in which the retailer can borrow from the bank and the supplier and seeks financial support from investors. The numerical simulations support our results.

DOI : 10.1051/ro/2022054
Classification : 35J20, 35J25, 35J60
Keywords: Capital constraint, Bank credit, trade credit, equity financing, risk constraint 
@article{RO_2022__56_3_1223_0,
     author = {Zhuo, Wenyan and Peng, Jiawu and Zhen, Zhiyuan and Wang, Jingru},
     title = {Mixed financing modes for capital-constrained supply chain with risk-averse members},
     journal = {RAIRO. Operations Research},
     pages = {1223--1258},
     year = {2022},
     publisher = {EDP-Sciences},
     volume = {56},
     number = {3},
     doi = {10.1051/ro/2022054},
     mrnumber = {4422231},
     zbl = {1491.91163},
     language = {en},
     url = {https://www.numdam.org/articles/10.1051/ro/2022054/}
}
TY  - JOUR
AU  - Zhuo, Wenyan
AU  - Peng, Jiawu
AU  - Zhen, Zhiyuan
AU  - Wang, Jingru
TI  - Mixed financing modes for capital-constrained supply chain with risk-averse members
JO  - RAIRO. Operations Research
PY  - 2022
SP  - 1223
EP  - 1258
VL  - 56
IS  - 3
PB  - EDP-Sciences
UR  - https://www.numdam.org/articles/10.1051/ro/2022054/
DO  - 10.1051/ro/2022054
LA  - en
ID  - RO_2022__56_3_1223_0
ER  - 
%0 Journal Article
%A Zhuo, Wenyan
%A Peng, Jiawu
%A Zhen, Zhiyuan
%A Wang, Jingru
%T Mixed financing modes for capital-constrained supply chain with risk-averse members
%J RAIRO. Operations Research
%D 2022
%P 1223-1258
%V 56
%N 3
%I EDP-Sciences
%U https://www.numdam.org/articles/10.1051/ro/2022054/
%R 10.1051/ro/2022054
%G en
%F RO_2022__56_3_1223_0
Zhuo, Wenyan; Peng, Jiawu; Zhen, Zhiyuan; Wang, Jingru. Mixed financing modes for capital-constrained supply chain with risk-averse members. RAIRO. Operations Research, Tome 56 (2022) no. 3, pp. 1223-1258. doi: 10.1051/ro/2022054

[1] BBC, Marks and Spencer profits fall as clothing disappoints. Retrieved from http://www.bbc.com/news/business-22605609 (Accessed on 5th April 2019) (2013).

[2] D. Bradley and M. Rubach, Trade credit and small businesses: a cause of business failures? Working paper, University of Central Arkansas (2002).

[3] E. Cao, L. Du and J. Ruan, Financing preferences and performance for an emission dependent supply chain: supplier vs. bank. Int. J. Prod. Econ. 88 (2019) 24–39.

[4] X. Chen, A model of trade credit in a capital-constrained distribution channel. Int. J. Prod. Econ. 159 (2015) 347–357. | DOI

[5] J. Chen, Q. Hu and J. Song, Effect of partial cross ownership on supply chain Performance. Eur. J. Oper. Res. 258 (2017) 525–536. | MR | Zbl | DOI

[6] T. Choi, D. Li and H. Yan, Mean-variance analysis of a single supplier and retailer supply chain under a returns policy. Eur. J. Oper. Res. 184 (2008) 356–376. | MR | Zbl | DOI

[7] T. Choi, C. Ma, B. Shen and Q. Sun, Optimal pricing in mass customization supply chains with risk-averse agents and retail competition. Omega 88 (2019) 150–161. | DOI

[8] A. Ferrando and K. Mulier, Do firms use the trade credit channel to manage growth?. J. Bank Finan. 37 (2013) 3035–3046. | DOI

[9] H. Fu and Y. Ma, Optimization and coordination of decentralized supply chains with vertical cross-shareholding. Comput. Ind. Eng. 132 (2019) 23–35. | DOI

[10] W. Güth, N. Nikiforakis and H. Normann, Vertical cross-shareholding: theory and experimental evidence. Int. J. Ind. Organ. 25 (2007) 69–89. | DOI

[11] S. Jianping and Y. Rubing, China MSME Finance Report 2016. Retrieved from: http://www.smefinanceforum.org/post/china-msme-finance-report-2016 (Accessed 10 March) (2019).

[12] W. Jin and Q. Zhang, Decision making in trade credit financing: impact of loss aversion and power imbalance. Int. Trans. Oper. Res. 28 (2021) 2607–2632. | MR | Zbl | DOI

[13] B. Jing, X. Chen and G. Cai, Equilibrium financing in a distribution channel with capital constraint. Prod. Oper. Manag. 21 (2012) 1090–1101. | DOI

[14] T. Koller, D. Lovallo and Z. Williams, Overcoming a bias against risk. Technical Report (2012).

[15] P. Kouvelis and W. Zhao, Financing the newsvendor: supplier vs. bank, and the structure of optimal trade credit contracts. Oper. Res. 60 (2012) 566–580. | MR | Zbl | DOI

[16] M. Lariviere and E. Porteus, Selling to the newsvendor: an analysis of price-only contracts. MSOM-Manuf. Ser. OP 3 (2001) 293–305. | DOI

[17] C. Lee and B. Rhee, Trade credit for supply chain coordination. Eur. J. Oper. Res. 214 (2011) 136–146. | MR | Zbl | DOI

[18] H. Lee, J. Zhou and J. Wang, Trade credit financing under competition and its impact on firm performance in supply chains. MSOM-Manuf Serv. OP 20 (2018) 36–52. | DOI

[19] Q. Li, B. Niu and L.-K. Chu, Buy now and price later: supply contracts with time-consistent mean-variance financial hedging. Eur. J. Oper. Res. 268 (2018) 582–595. | MR | Zbl | DOI

[20] G. Li, H. Wu and S. Xiao, Financing strategies for a capital-constrained manufacturer in a dual-channel supply chain. Int. Trans. Oper. Res. 27 (2019) 2317–2339. | MR | Zbl | DOI

[21] S. Longhofer and J. Santos, The importance of bank seniority for relationship lending. J. Finan. Intermed. 9 (2000) 57–89. | DOI

[22] X. Lu and Z. Wu, How taxes impact bank and trade financing for multinational firms. Eur. J. Oper. Res. 286 (2020) 218–232. | MR | Zbl | DOI

[23] V. Nagali, J. Hwang, D. Sanghera, M. Gaskins, M. Pridgen, T. Thurston, P. Mackenroth, D. Branvold, P. Scholler and P. Shoemaker, Procurement risk management (PRM) at Hewlett-Packard company. Interfaces 38 (2008) 51–60. | DOI

[24] A. Norrman and U. Jansson, Ericsson’s proactive supply chain risk management approach after a serious sub-supplier accident. Int. J. Phys. Distrib. Logist. Manag. 34 (2004) 434–456. | DOI

[25] A. Schwartz, Priority contracts and priority in bankruptcy. Cornell Law Rev. 82 (1997) 1396–1419.

[26] F. Silaghi and F. Moraux, Trade credit contracts: design and regulation. Eur. J. Oper. Res. 296 (2021) 980–992. | MR | Zbl | DOI

[27] Z. Wang, L. Qi, Y. Zhang and Z. Liu, A trade-credit-based incentive mechanism for a risk-averse retailer with private information. Comput. Ind. Eng. 154 (2021) 107101. | DOI

[28] Y. Wei and T. Choi, Mean-variance analysis of supply chains under wholesale pricing and profit sharing schemes. Eur. J. Oper. Res. 204 (2010) 255–262. | Zbl | DOI

[29] World Bank Group, Enterprise surveys data for China. Retrieved from: http://www.enterprisesurveys.org/data/exploreeconomies/2012/china_finance (Accessed on December 27, 20) (2012).

[30] C. Xia, Y. Xiao, W. Zhuo and Y. Hsiao, Mixed financing strategies for capital-constrained retailer in the Chinese financial market. Pac. Basin. Finan. J. 63 (2020) 101395. | DOI

[31] S. Xiao, S. Sethi, M. Liu and S. Ma, Coordinating contracts for a financially constrained supply chain. Omega 72 (2017) 71–86. | DOI

[32] N. Yan and B. Sun, Coordinating loan strategies for supply chain financing with limited credit. OR Spect. 35 (2013) 1039–1058. | MR | Zbl | DOI

[33] Q. Yan and F. Ye, Financing equilibrium in a three-echelon supply chain: the impact of a limited bank loan. Appl. Econ. 3 (2020) 1–14.

[34] N. Yan, X. He and Y. Liu, Financing the capital-constrained supply chain with loss aversion: supplier finance vs. supplier investment. Omega 88 (2019) 162–178. | DOI

[35] N. Yan, X. Jin, H. Zhong and X. Xu, Loss-averse retailers’ financial offerings to capital-constrained suppliers: loan vs. investment. Int. J. Prod. Econ. 227 (2020) 107655.

[36] S. Yang and J. Birge, Trade credit, risk sharing, and inventory financing portfolios. Manage. Sci. 64 (2018) 3667–3689. | DOI

[37] H. Yang, W. Zhuo and L. Shao, Equilibrium evolution in a two-echelon supply chain with financially constrained retailers: the impact of equity financing. Int. J. Prod. Econ. 185 (2017) 139–149. | DOI

[38] H. Yang, F. Sun, J. Chen and B. Chen, Financing decisions in a supply chain with a capital-constrained manufacturer as new entrant. Int. J. Prod. Econ. 216 (2019) 321–332. | DOI

[39] H. Yang, Z. Zhen and H. Wan, Optimal portfolio financing selection in a capital-constrained supply chain with risk-averse members. Appl. Econ. 53 (2021) 4713–4733. | DOI

[40] H. Yang, W. Zhuo, L. Shao and S. Talluri, Mean-variance analysis of wholesale price contracts with a capital-constrained retailer: trade credit financing vs. bank credit financing. Eur. J. Oper. Res. 294 (2021) 525–542. | MR | Zbl | DOI

[41] D. Yi, J. Yi, L. Wu and Z. Zhou, Two-echelon supply chain network design with trade credit. Comput. Oper. Res. 131 (2021) 105270. | MR | Zbl | DOI

[42] Q. Zhang, D. Ming, J. Luo and A. Segerstedt, Supply chain coordination with trade credit and quantity discount incorporating default risk. Int. J. Prod. Econ. 153 (2014) 352–360. | DOI

[43] Y. Zhang, W. Chen and Q. Li, Third-party remanufacturing mode selection for a capital-constrained closed-loop supply chain under financing portfolio. Comput. Ind. Eng. 157 (2021) 107315. | DOI

[44] J. Zhou and H. Groenevelt, Impacts of financial collaboration in a three-party supply chain. Working paper, The Simon School, University of Rochester, Rochester, NY (2007).

[45] Y. Zhu, L. Zhou, C. Xie, G. Wang and T. Nguyen, Forecasting SMEs, credit risk in supply chain finance with an enhanced hybrid ensemble machine learning approach. Int. J. Prod. Econ. 211 (2019) 22–33. | DOI

[46] W. Zhuo, L. Shao and H. Yang, Mean-variance analysis of option contracts in a two-echelon supply chain. Eur. J. Oper. Res. 271 (2018) 535–547. | MR | Zbl | DOI

Cité par Sources :