Purchase Order Financing: Credit, Commitment, and Supply Chain Consequences

Reindorp, Matthew; Tanrısever, Fehmi; Lange, Anne

doi:10.2139/ssrn.2616812

Cited by 9 publications

(10 citation statements)

References 34 publications

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“…The term SCF has sometimes been used to describe related practices (e.g., inventory financing, work-in-progress financing, or purchase order financing; cf. Reindorp, Tanrisever, & Lange, 2015). In this article, we focus on the meaning that is commonly understood among managers (Dunn, 2014, March;Herath, 2015;Wuttke, Blome, Foerstl, & Henke, 2013): SCF, as we study it here, is based on reverse factoring, with an independent third party (the SCF provider) providing a technology platform to organize all aspects involved (Rogers et al, 2016a).…”

Section: Introductionmentioning

confidence: 99%

An empirical analysis of supply chain finance adoption

Wuttke

Rosenzweig

Heese

2019

J of Ops Management

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Supply chain finance (SCF) makes the funding of the supply chain more efficient because it extends the financial strengths of buyers to their suppliers. Nevertheless, buyers sometimes struggle to persuade suppliers to adopt SCF quickly. To craft more effective supplier onboarding strategies, buyers need to know which suppliers are likely to adopt SCF faster. Drawing on the theoretical perspective on organizational motivation, we develop a research framework that uncovers the key drivers of supplier adoption speed. Our framework combines efficiency motive drivers, identified by recent analytical studies on SCF, with legitimacy motive drivers, which stem from a supplier's institutional environment and are new to the SCF literature. We test our hypotheses using a unique data set from a leading financial technology platform provider. We find that suppliers with more limited access to financing tend to adopt SCF faster. In addition, suppliers adopt SCF faster if such adoption is associated with more pronounced reductions in their financing costs. Legitimacy motive drivers also impact supplier adoption speed. Specifically, our results suggest that mimetic and normative pressures accelerate the speed at which suppliers adopt SCF, while coercive pressures seem to have such an effect only when the buyer's stakes are high.

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Section: Introductionmentioning

confidence: 99%

An empirical analysis of supply chain finance adoption

Wuttke

Rosenzweig

Heese

2019

J of Ops Management

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“…Reindorp et al. (2018) address another new perspective in purchase order financing: the potential of purchase commitments for mitigating capital market frictions. Specifically, a commitment brings to potentially opposing effects for the retailer: the financing effect and the risk‐sharing effect.…”

Section: Supply Chain Financementioning

confidence: 99%

Operations‐Finance Interface in Risk Management: Research Evolution and Opportunities

Wang

Zhao

Huchzermeier

2021

Production and Operations Management

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The operations‐finance interface (OFI) jointly optimizes material, monetary, and information flows under intricate sources of uncertainty. To sketch the broad landscape in this emerging and interdisciplinary field, this study synthesizes literature across diverse themes and dispersed methodologies, screens systematically the research progression from original foundations to recent contributions in each major research stream, and thereby advocates future research innovations on prospective topics in light of the interconnections and potential reciprocity between operations and finance from risk management aspects.

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“…After the seller ships the goods to the buyer, the finance provider debits the principal plus interest from the seller's account on maturity (Global Supply Chain Finance Forum, 2016). Analytical models have been developed to investigate the applications of POF (Reindorp et al, 2015) and to compare it with other SCF solutions (Zhao and Huchzermeier, 2019;Tang et al, 2018;Wu et al, 2014). These reveal the conditions under which POF is an attractive financing option and can improve performance.…”

Section: Scf and Pofmentioning

confidence: 99%

“…Purchase order finance (POF) is a type of loan a seller obtains from a finance provider based on purchase orders issued by a buyer (Global Supply Chain Finance Forum, 2016;Tang et al, 2018). POF represents an innovative supply chain finance (SCF) solution that covers the seller's working capital requirements, such as the procurement of raw materials and other pre-shipment expenses, thus ensuring that delivery to the buyer is fulfilled (Tang et al, 2018;Reindorp et al, 2015).…”

Section: Introductionmentioning

confidence: 99%

“…Integrating the information between SCSPs and product designers can thus improve supply chain connectivity and transparency, and allows the SCSPs to monitor and control the information and physical flows in supply chains. They can then better evaluate product designers' abilities or willingness to repay loans (Bals, 2019;Reindorp et al, 2015). Information integration refers to the exchange and transfer of information that facilitates collaboration and cooperation among supply chain members through media such as face-to-face meetings, telephone, fax, email and information systems (Cai et al, 2010;Li et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

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The impact of information integration on purchase order finance and new product launch: a case study

Zhang

Huang

Zhao

et al. 2021

IJOPM

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PurposeIn this study, we examine the implementation of purchase order finance (POF) which is an innovative supply chain finance (SCF) solution by an innovative SCF lender (i.e. supply chain service provider (SCSP)). The effect of information integration between the SCSP (lender) and product designers (borrowers) on the lender's POF decisions and the borrowers' new product launch is investigated.Design/methodology/approachWe conduct a case study in the Chinese smartphone industry. A mixed methods design is used, and data are collected from both the supply chain service provider (SCSP) and product designers. We first conduct a qualitative study. Hypotheses are developed concerning the relationships between information integration, in terms of social interaction and information system integration, POF and new product launch. We then conduct a quantitative study. The multilevel structural equation modelling method is used to test the hypotheses.FindingsWe find that information system integration is positively associated with POF but has no significant effect on new product launch. Social interaction is negatively associated with POF but positively associated with new product launch. POF is positively associated with new product launch.Originality/valueThis study contributes to the literature by empirically examining the implementation of POF from both the lender's and borrower's perspectives. We find that information system integration and social interaction have different effects on POF and new product launch. The results thus provide insights into how a lender makes POF decisions and reveal the benefits of POF for borrowers.

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Purchase Order Financing: Credit, Commitment, and Supply Chain Consequences

Cited by 9 publications

References 34 publications

An empirical analysis of supply chain finance adoption

An empirical analysis of supply chain finance adoption

Operations‐Finance Interface in Risk Management: Research Evolution and Opportunities

The impact of information integration on purchase order finance and new product launch: a case study

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