A Model for the Integration of Credit and Inventory Management

Schiff, Michael; Lieber, Zvi

doi:10.2307/2978219

Cited by 34 publications

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“…Kim and Chung (1990) propose a model to combine the lot-size decision and the discount offered to customers for early payment. 4 Schiff and Lieber (1974) use control theory to study the relationship between inventory and accounts receivable policy. More recently, scholars have explored the significance of payment schemes by means of stochastic inventory models.…”

Section: Research Questions and Literaturementioning

confidence: 99%

The price of reverse factoring: Financing rates vs. payment delays

Vliet

Reindorp

Fransoo

2015

European Journal of Operational Research

131

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a b s t r a c tReverse factoring-a financial arrangement where a corporation facilitates early payment of its trade credit obligations to suppliers-is increasingly popular in industry. Many firms use the scheme to induce their suppliers to grant them more lenient payment terms. By means of a periodic review base stock model that includes alternative sources of financing, we explore the following question: what extensions of payment terms allow the supplier to benefit from reverse factoring? We obtain solutions by means of simulation optimisation. We find that an extension of payment terms induces a non-linear financing cost for the supplier, beyond the opportunity cost of carrying additional receivables. Furthermore, we find that the size of the payment term extension that a supplier can accommodate depends on demand uncertainty and the cost structure of the supplier. Overall, our results show that the financial implications of an extension of payment terms need careful assessment in stochastic settings.

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Section: Research Questions and Literaturementioning

confidence: 99%

The price of reverse factoring: Financing rates vs. payment delays

Vliet

Reindorp

Fransoo

2015

European Journal of Operational Research

131

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“…This strand of literature suggests the existence of an optimal level of NWC, hence a non-linear relationship between NWC investment and firm value. In fact, holding a high level of NWC protects the firm from the fluctuations in the price of inputs (Schiff and Lieber, 1974), and therefore reduces supply costs and allows the firm to offer better services. However, holding a high level of NWC requires additional capital, which is associated with higher opportunity and financing costs (Kieschnick, Laplante, and Moussawi, 2013), hence high interest expenses and higher credit risk (Aktas, Croci, and Petmezas, 2015).…”

Section: Introductionmentioning

confidence: 99%

State and foreign ownership and the value of working capital management

Ben‐Nasr

2016

Journal of Corporate Finance

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“…Inventories are typically purchased on open accounts and funded partially or entirely by trade payables. As a result, inventory policy is inevitably affected by credit-market conditions (e.g., Haley and Higgins 1973;Schiff and Lieber 1974;and Bougheas, Mateut, and Mizen 2009). In addition, along the supply chains any inventory decision of downstream firms can impose production externality on upstream firms (Lee, Padmanabhan, and Whang 2004), and also determine how the upstream firms may extend lines of credit (i.e., trade receivables) to their downstream counterparts.…”

Section: Related Theories and Empiricsmentioning

confidence: 99%

Supply Chains and Credit-Market Shocks: Some Implications for Emerging Markets

Jinjarak

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, the ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractDriven by the increasingly important role of supply chains in global production, this paper studies empirical association between global credit-market shocks and firm behavior towards liquidity needs across countries and industries. Focusing on the adjustment of workingcapital financing, we find two pieces of supporting evidence from international firm-level panel data covering the period 2002:I-2012:IV. First, for industries where specific investment in the input supplier-customer relationship is large, firms are more exposed to credit-market shocks. We find that measures of global credit-market shocks are negatively associated with trade receivables, trade payables, and inventories, conditional on the level of contract intensity in the industries where firms operate. Second, firms in emerging markets are more vulnerable to credit-market shocks than are firms in developed countries. We are also able to verify the economic significance of sales growth, operating cash flows, cash stock, and firm size in the overall adjustment. Our findings highlight the importance of balance-sheet contagion along supply chains during the 2007-09 global financial crisis.

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A Model for the Integration of Credit and Inventory Management

Cited by 34 publications

References 0 publications

The price of reverse factoring: Financing rates vs. payment delays

The price of reverse factoring: Financing rates vs. payment delays

State and foreign ownership and the value of working capital management

Supply Chains and Credit-Market Shocks: Some Implications for Emerging Markets

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