Optimal Procurement Strategy for Supply Chain with Trade Credit and Backorder under CVaR Criterion

Gaoke Wu, Bo Feng and Libin Guo
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Gaoke Wu: School of Management Science, Qufu Normal University, Rizhao 276826, China
Bo Feng: Business and Law Faculty, Deakin University, Locked Bag 20000, Geelong, VIC 3220, Australia
Libin Guo: School of Management Science, Qufu Normal University, Rizhao 276826, China

Sustainability, 2021, vol. 13, issue 18, 1-16

Abstract: Some capital-constrained and risk-averse retailers may unable to obtain financing from banks due to insufficient collateral and high loan costs, so some retailers tend to use trade credit financing to ease their financial pressure. For the two echelon supply chain composed of a well-funded supplier and a capital-constrained retailer with risk-averse preference, a trade credit strategy model with the supplier-led is established in this paper. By analyzing both parties’ benefits, we derive the model solution and provide optimal decisions to all petitioners. The results obtained in this paper show that the optimum order quantity under the Conditional Value-at-Risk (CVaR) criterion declines w.r.t. the confidence level, and the wholesale price of the supplier increases w.r.t. the confidence level. The reason is that when the retailer makes fewer orders, the supplier will correspondingly increase the wholesale price to maximize their profit. On the other hand, the ordering policy with allowing backorder will make the retailer place fewer orders. Finally, the proposed model is indicated by the given numerical experiments.

Keywords: Stackelberg game; trade credit; CVaR; backordering; modeling (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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