Coordination Strategies of Investing and Financing in Supply Chain Based on Suppliers' Repurchase Incentives

Abstract

Abstract:

Considering the impact of buyback incentives, delayed payments, wholesale price and bankruptcy risk factor, we study coordinated decision-making problems between commercial credit financing and supply chain operations investment in thetwo-level supply chain consisting of a supplier and a retailer with cash constraints in this paper. We comparatively analyze optimal purchase strategies in supply chain when a capital-constrained retailer selects trade credit financing and bank loans under centralized decision-making. Based on the hypothesis of economic behavior of maximization profit of their own, we research how the dominant supplier in Stackelberg Game under decentralized decision-making situation adopts multi-contract design to achieve optimal profits of supply chain and its own. Our results show that gain of integrated supply chain is better off if a retailer utilizes trade credit financing provided by supplier without additional free cash instead of loans from banks under the scenario of centralized decision-making in supply chain. In decentralized decision-making supply chain, the supplier may set trade credit and buyback contract to share inventory financing costs and the risks of uncertainty inventory demand, which may make the retailer order the same optimal purchases as integrated supply chain under joint decisions. Furthermore, the supplier can also adjust sharing ratio of joint profits in the supply chain by changing the wholesale price. Finally, some numerical examples are used to illustrate the results obtained in this paper and some management enlightenments are proposed.

Key words: trade credit, operations investment, buyback contracts, bankruptcy risk, supply chain coordination

Dou Yaqin, Bai Shaobu, Chu Jun. Coordination Strategies of Investing and Financing in Supply Chain Based on Suppliers' Repurchase Incentives[J]. , 2016, 28(6): 205-215.

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