Joint Operational and Financial Collaboration in a Capital-Constrained Supply Chain Under Manufacturer Collateral

Gongbing Bi (), Yalei Fei, Xiaoyong Yuan () and Dong Wang ()
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Gongbing Bi: School of Management, University of Science and Technology of China, 96 Jinzhai Road, Hefei 230026, Anhui, P. R. China
Yalei Fei: School of Management, University of Science and Technology of China, 96 Jinzhai Road, Hefei 230026, Anhui, P. R. China
Xiaoyong Yuan: School of Management, University of Science and Technology of China, 96 Jinzhai Road, Hefei 230026, Anhui, P. R. China
Dong Wang: School of Business Administration, Guangzhou University, 230 Waihuanxi Road, Guangzhou 510006, Guangdong, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2018, vol. 35, issue 03, 1-23

Abstract: Operational collaboration in a supply chain is important due to the fierce competition among supply chains. However, the collaboration in a supply chain is often hindered by its distribution channel’s lack of funds. It is of significance to alleviate the capital constraint problem of the distribution channel and explore new joint operational and financial collaboration solutions. In this paper, we focus on exploring the optimal solution of operational collaboration in the presence of manufacturer collateral. We consider a supply chain consisting of a well-capitalized manufacturer and a capital-constrained retailer that faces difficulties obtaining credit from the bank. To help the retailer access financing for a purchase order, the manufacturer promises to pay the lender a proportion of the retailer’s loan if the retailer goes bankrupt. We find that when the bank credit with manufacturer collateral is considered as a mix of trade credit and bank credit, the retailer’s financing equilibrium depending on the maximum wholesale price what the manufacturer can set, can be neither trade credit nor bank credit alone, but a combination of them. Moreover, the retailer’s order quantity and the chain’s operational collaboration level will benefit from the manufacturer collateral.

Keywords: Supply chain finance; capital-constrained; manufacturer collateral; coordination (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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DOI: 10.1142/S0217595918500100

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