Computers and Operations Research
Pre-IPO Operational and Financial Decisions
Management Science
Coordinating a two-level supply chain with delay in payments and profit sharing
Computers and Industrial Engineering - Special issue: Sustainability and globalization: Selected papers from the 32 nd ICC&IE
Inventory Management with Asset-Based Financing
Management Science
Coordinated inventory models with compensation policy in a three level supply chain
ICCSA'06 Proceedings of the 2006 international conference on Computational Science and Its Applications - Volume Part III
Financing newsvendor inventory
Operations Research Letters
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Both researchers and practitioners recognize the importance of the interactions between financial and inventory decisions in the development of cost effective supply chains. Moreover, achieving effective coordination among the supply chain players has become a pertinent research issue. This paper considers a three-level supply chain, consisting of a capital-constrained supplier, a retailer, and a financial intermediary (bank), coordinating their decisions to minimize the total supply chain costs. Specifically, we consider a retailer managing its cash through the supplier's bank, in return for permissible delay in payments from the supplier. The bank, benefiting from increasing its cash holdings with the retailer's cash deposits, offers the supplier a discount on its borrowing rate. We show that the proposed coordination mechanism achieves significant cost reduction, by up to 26.2%, when compared to the non-coordinated model. We also find that, with coordination, the retailer orders in larger quantities than its economic order quantity, and that a higher return on cash for the retailer leads to a higher order quantity. Furthermore, we empirically validate our proposed coordination mechanism, by showing that banks, retailers, and suppliers have much to gain through collaboration. Thus, using COMPUSTAT datasets for the years 1950 through 2012, we determine the most important factors that affect the behavior of the retailers and suppliers in granting and receiving trade credit. Our results indicate that engaging into such a coordination mechanism is a win-win situation to all parties involved.