A joint inventory–finance model for coordinating a capital-constrained supply chain with financing limitations

Abstract

Faced with economic recession, firms struggle to find ways to stay competitive and maintain market share. Effective coordination of the supply chain can solve this problem, but this may fail if existing capital constraints and financial flows are ignored. This study addresses the challenge by exploiting coordination through joint decision-making on the physical and financial flows of a capital-constrained supply chain. We also consider the capital-constrained member’s financing limitations that lead to lost sales. Two scenarios based on non-coordinated and coordinated structures are modeled in the form of bi-objective optimization problems that simultaneously optimize system costs and service levels. The models are solved using the $$\varepsilon$$ ε -constraint method. The results indicate that the non-coordinated model cannot satisfy more than about 50% of the demand due to capital shortage and financing limitations, while the coordinated model can satisfy all of the demand via internal financing. Furthermore, the proposed coordination scheme leads to cost reduction for the members and the total system. To motivate all members to accept the proposed coordination scheme, a cost-sharing mechanism is applied to the coordination procedure. Finally, a sensitivity analysis concerning financial parameters is provided for validating the coordination model.

Trade credit financing for supply chain coordination under financial challenges: a multi-leader–follower game approach

“…Zhang et al (2021a, b) used trade credit and bank loan financing to eliminate the double marginalization effect in a green SC with a manufacturer and a capital-constrained retailer. Emtehani et al (2021b) coordinated a capital-constrained three-level SC by deciding upon the operational-financial issues of all members jointly considering TCF and advanced payment in a deterministic environment.…”

Does supplier concentration matter to investors during the COVID-19 crisis: evidence from China?

“…While our study focuses on the stock price effect of supply chain disruption related to supplier concentration under COVID-19, it is useful to briefly review the general literature on supply chain viability and its ripple effects under economic difficulties. Emtehani et al (2021) argue that, under economic recession, an effective coordination of the supply chain through a joint decision-making on the physical and financial flows of a capital-constrained supply chain model can help firms to stay competitive and maintain market share. Dolgui et al (2018) provide a comprehensive review of the supply chain ripple effect literature.…”

Framework of Blockchain-Supported E-Commerce Platform for Small and Medium Enterprises

“…To alleviate the current financing dilemma, many studies have proposed innovative financing methods, especially in supply chain finance. There are three main financing methods: accounts receivable financing, prepayment financing, and inventory financing [31][32][33]. Accounts receivable financing refers to an enterprise utilizing accounts receivable as collateral to apply for loans from banks [31].…”

“…This can help enterprises solve the capital bottleneck in the procurement process. Inventory financing refers to an enterprise taking the goods stored in the warehouse (generally designated by the bank) as a guarantee to apply for loans from banks [33]. These financing methods require enterprises to provide collateral or bills to prove their repayment ability; moreover, financial institutions need to verify and keep collaterals and bills, which adds to the workload of banks and the borrowing cost of SMEs.…”