Supply chain coordination under trade credit and retailer effort

Dinh Anh Phan, Thi Le Hoa Vo () and Anh Lai
Additional contact information
Thi Le Hoa Vo: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

Post-Print from HAL

Abstract: In this paper, we study the role of trade credit in coordinating a Capital Constrained Supply Chain in the presence of retailer Effort (CCSCE), essentially because of the impact of its related default risks on the relationship between the chain's members. We consider a CCSCE consisting of a supplier and a retailer where the retailer may exert costly promotional efforts to increase the market demand but has limited capital and no access to bank financing due to low credit rating. Conversely, the supplier has adequate funds to offer trade credit to the retailer without borrowing from external channels. We then examine whether the existing coordination contracts can still coordinate the CCSCE under trade credit. Our result shows that these contracts can achieve coordination of the supply chain when the interest rate of trade credit is competitively priced. Nevertheless, this position cannot always be reached. That's why we propose a generalised contract based on risk compensation to coordinate the CCSCE. Using our proposed coordinating contract, the supplier perfectly coordinates the retailer's decisions for the largest joint profit, and arbitrarily allocates the maximised joint profit among supply chain members. Finally, the numerical study allows to verify this finding. From managerial insights, our results provide the supply chain managers with novel insights on how to combine trade credit with the existing coordination contracts in order to improve the profitability of the entire supply chain as well as the individual member.

Keywords: trade credit; capital constraint; promotional effort; risk compensation; supply chain coordination (search for similar items in EconPapers)
Date: 2019-01-25
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02024324
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Published in International Journal of Production Research, 2019, 57 (9), pp.2642-2655. ⟨10.1080/00207543.2019.1567950⟩

Downloads: (external link)
https://shs.hal.science/halshs-02024324/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-02024324

DOI: 10.1080/00207543.2019.1567950

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().