The design of a flexible capital-constrained global supply chain by integrating operational and financial strategies

Mengyue Wang and Hongxuan Huang

Omega, 2019, vol. 88, issue C, 40-62

Abstract: The amount of capital possessed by a supply chain usually is a hard constraint for the design of its configuration. In this paper, a scenario-based approach is proposed for designing a flexible capital-constrained global supply chain (CCGSC) in which the capital constraint can be relaxed through loans from financial institutions or institutional investors, and the coordination with operational strategies such as constructing or leasing facilities to meet uncertain demands. The integration of operational and financial strategies is formulated as a mixed-integer linear programming model to maximize the quasi shareholder value (QSV) of the supply chain, which is defined by the summation of the present value of cash in hand and the assets at the end of the planning horizon, along with hedging the uncertainties from demands and exchange rates. In particular, the strategy of leasing a facility, which provides an alternative selection for the facility location, requires less amount of the capital than that of buying or constructing it. The research on the CCGSC also indicates that the complementary property holds for both the remaining capital of loans with higher costs and another available loan with a lower cost under certain conditions. A case study is presented to illustrate effectiveness and efficiency of the scenario-based approach. The numerical results verify that the collaborative decisions on the flows of goods and financial resources could improve the flexibility of the supply chain and its performance, even in extreme scenarios.

Keywords: Capital-constrained global supply chain; Flexibility; Leasing; Loan; Demand uncertainty; Exchange rate uncertainty (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1016/j.omega.2018.11.016

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