We consider a supply chain with a retailer and a supplier: A newsvendor-like retailer has a single opportunity to order a product from a supplier to satisfy future uncertain demand. Both the retailer and supplier are capital constrained and in need of short-term financing. In the presence of bankruptcy risks for both the retailer and supplier, we model their strategic interaction as a Stackelberg game with the supplier as the leader. We use the supplier early payment discount scheme as a decision framework to analyze all decisions involved in optimally structuring the trade credit contract (discounted wholesale price if paying early, financing rate if delaying payment) from the supplier's perspective. Under mild assumptions we conclude that a risk-neutral supplier should always finance the retailer at rates less than or equal to the risk-free rate. The retailer, if offered an optimally structured trade credit contract, will always prefer supplier financing to bank financing. Furthermore, under optimal trade credit contracts, both the supplier's profit and supply chain efficiency improve, and the retailer might improve his profits relative to under bank financing (or equivalently, a rich retailer under wholesale price contracts), depending on his current “wealth” (working capital and collateral).

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The ongoing global novel coronavirus pneumonia COVID‐19 outbreak has engendered numerous cases of infection and death. COVID‐19 diagnosis relies upon nucleic acid detection; however, currently recommended methods exhibit high false‐negative rates and are unable to identify other respiratory virus infections, thereby resulting in patient misdiagnosis and impeding epidemic containment. Combining the advantages of targeted amplification and long‐read, real‐time nanopore sequencing, herein, nanopore targeted sequencing (NTS) is developed to detect SARS‐CoV‐2 and other respiratory viruses simultaneously within 6–10 h, with a limit of detection of ten standard plasmid copies per reaction. Compared with its specificity for five common respiratory viruses, the specificity of NTS for SARS‐CoV‐2 reaches 100%. Parallel testing with approved real‐time reverse transcription‐polymerase chain reaction kits for SARS‐CoV‐2 and NTS using 61 nucleic acid samples from suspected COVID‐19 cases show that NTS identifies more infected patients (22/61) as positive, while also effectively monitoring for mutated nucleic acid sequences, categorizing types of SARS‐CoV‐2, and detecting other respiratory viruses in the test sample. NTS is thus suitable for COVID‐19 diagnosis; moreover, this platform can be further extended for diagnosing other viruses and pathogens.

Problem description: We study the impact of credit ratings on operational and financial decisions of a supply chain with a supplier and a retailer interacting via an early payment discount contract. The retailer has a single opportunity to order a product from the supplier to satisfy future uncertain demand. Both the retailer and supplier are capital constrained, and the retailer can use both short-term bank loans and trade credits for his financing needs, while the supplier can use short-term bank loans and/or the retailers early payment. We analyze for all relevant operational decisions (wholesale price, trade credit rates, bank loans, and order quantity) for capital-constrained firms. Academic/practical relevance: We add a framework on who should finance inventories, and at what rates, in the presence of differential credit ratings of the supply chain parties. Methodology: Within a modified selling to the newsvendor Stackelberg game with the supplier as the leader, we derive the equilibrium trade credit rates, wholesale price, bank loans, and order quantity. Results: We show there exists a threshold such that if the supplier’s credit rating is above it, then the supplier offers trade credits with zero interest rate and the retailer uses trade credits only. Otherwise, the supplier sets a positive rate, which motivates the retailer to combine trade credits and bank loans. The supplier always benefits from working with good rating retailers. A retailer prefers to work with suppliers outside the supplier’s credit rating hole (a finite set of ratings) over suppliers with ratings within the range. Managerial implications: We provide insights on who should finance supply chain inventories and at what rates when there are differential credit rating between the supplier and retailer. We provide a plausible explanation for the practice of large and good credit rating retailers maintaining a small cash ratio and working with small suppliers in developing countries. The online appendix is available at https://doi.org/10.1287/msom.2017.0669 . This paper has been accepted for the Manufacturing & Service Operations Management Special Issue on Interface of Finance, Operations, and Risk Management.

We study contract design and coordination of a supply chain with one supplier and one retailer, both of which are capital constrained and in need of short-term financing for their operations. Competitively priced bank loans are available, and the failure of loan repayment leads to bankruptcy, where default costs may include variable (proportional to the firm’s sales) and fixed costs. Without default costs, it is known that simple contracts (e.g., revenue-sharing, buyback, and quantity discount) can coordinate and allocate profits arbitrarily in the chain. With only variable default costs, buyback contracts remain coordinating and equivalent to revenue-sharing contracts but are Pareto dominated by revenue-sharing contracts when fixed default costs are present. Thus, for general bankruptcy costs, contracts without buyback terms are of most interest. Quantity discount contracts fail to coordinate the supply chain, since a necessary condition for coordination is to proportionally reallocate debt obligations within the channel. With only variable default costs and with high fixed default costs exhibiting substantial economies-of-scale, revenue-sharing contracts with working capital coordination continue to coordinate the chain. Unexpectedly, for fixed default costs with small economies-of-scale effects, the two-firm system under a revenue-sharing contract with working capital coordination might have higher expected profit than the one-firm system. Our results provide support for the use of revenue-sharing contracts with working capital coordination for decentralized management of supply chains when there are bankruptcy risks and default costs. This paper was accepted by Serguei Netessine, operations management.