The impacts of supply chain finance initiatives on firm risk: evidence from service providers listed in the US

Lam, Hugo K.S.; Zhan, Yuanzhu

doi:10.1108/ijopm-07-2020-0462

Cited by 27 publications

(20 citation statements)

References 87 publications

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“…Some involve only partners from the traditional supply chain, such as in a VMI arrangement (e.g. Caniato et al, 2016); but, for the most part, the literature deals with SCF provision from external providers, mainly financial service providers (FSPs), in particular banks (Silvestro and Lustrato, 2014;Song et al, 2021) as well as new entrants like logistics service providers (LSPs) (Chakuu et al, 2020;Elliot et al, 2020) and SCF providers (Lam and Zhan, 2021). Prior research contributions have been insightful but limited to only one (Wuttke et al, 2013a;Liebl et al, 2016) or a few SCF mechanisms (Gelsomino et al, 2019;Wu et al, 2019) or focused predominantly on the upstream end of the supply chain only (Wuttke et al, 2013b;Martin and Hofmann, 2019), ignoring the downstream part.…”

Section: Scf Mechanisms and The Proposed Dyadic-triadic Scf Distinctionmentioning

confidence: 99%

“…Recent work has also examined the impact of SCF on service providers' financial risk and the role of digital platforms in supporting SCF adoption (e.g. Lam and Zhan, 2021; Song et al. , 2021).…”

Section: Literature Review and Relevant Theoriesmentioning

confidence: 99%

“…, 2020; Elliot et al. , 2020) and SCF providers (Lam and Zhan, 2021). Prior research contributions have been insightful but limited to only one (Wuttke et al.…”

Section: Literature Review and Relevant Theoriesmentioning

confidence: 99%

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The relational focus of small and medium sized actors' understandings of supply chain finance (SCF)

Phraknoi

Busby

Stevenson

2022

IJOPM

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PurposeThis paper aims to investigate small and medium-sized upstream suppliers' and downstream distributors' understandings of supply chain finance (SCF) arrangements and their decisions to adopt such schemes.Design/methodology/approachIn this paper grounded theory-informed methods are employed, involving 56 in-depth interviews with informants from small and medium-sized enterprises (SMEs), banks and subject experts in the United Kingdom (UK) and Thailand. A category structure for the data is developed. The findings are then examined systematically from both a transaction cost economics (TCE) and non-TCE perspective.FindingsSME members made sense of SCF through a core distinction between dyadic and triadic SCF arrangements. The former maintains independence between physical and financial supply chains, whereas the latter causes them to be closely coupled or even entangled. The SCF adoption decisions of SMEs were based on a consideration of four related aspects: relationality, awareness, control and context. The authors demonstrate the limits of TCE in explaining the findings, leading to a proposed combined theory of the transactional and, importantly, non-transactional influences on how SMEs make decisions about SCF.Practical implicationsFocal firms wanting their SME suppliers and distributors to participate in triadic SCF (TSCF), i.e. reverse factoring and distributor finance, need to understand that transitioning to such schemes involves the unwinding of existing financing arrangements, which may be problematic for SMEs. Moreover, it is important to be aware of SMEs' concerns, such as about what accessing TSCF might signal to the focal firm about their financial health and about the potential loss of control that might result from entangling the physical and financial aspects of supply chains.Originality/valueThis paper unpack the perspectives of both SME suppliers and distributors of large focal firms in supply chains. These firms appear less concerned with the economic advantages (transaction costs) of SCF and more concerned with the relational consequences or non-transactional costs of participation in a TSCF arrangement. The dyadic-triadic distinction provides a new and meaningful way of categorising SCF mechanisms, which also broadens the service triads’ literature from a focus on outsourcing services for a focal firm's customers to outsourcing financing for its suppliers or distributors. The paper also addresses gaps identified by Gelsomino et al. (2016) regarding the need for a general theory of SCF, for empirically-based holistic studies of SCF applications, and a tool for selecting SCF mechanisms.

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Section: Scf Mechanisms and The Proposed Dyadic-triadic Scf Distinctionmentioning

confidence: 99%

Section: Literature Review and Relevant Theoriesmentioning

confidence: 99%

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The relational focus of small and medium sized actors' understandings of supply chain finance (SCF)

Phraknoi

Busby

Stevenson

2022

IJOPM

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“…Companies often suffer a buyer's long payment delay due to buyer financing, quality control and defect-free product payment terms, incurring capital pressures to some extent (Yu et al, 2021). Companies with high bargaining power have the initiative to shorten the downstream payment days and extend the upstream payables to increase liquidity and working capital (Lam and Zhan, 2021). However, many small and medium-sized enterprises (SMEs) with limited bargaining power often face financing challenges because traditional financing instruments may be very costly or unavailable to them (Chen et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

Configurations of financing instruments for supply chain cost reduction: evidence from Chinese manufacturing companies

Wang

Zhao

2022

IJOPM

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PurposeAlthough supply chain finance (SCF) aims to optimize capital flows in the supply chain process, its effectiveness in improving cost performance remains controversial. From the perspective of efficiency motives, this study aims to explore how the combinations of SCF solutions and traditional financing instruments lead to supply chain cost reduction.Design/methodology/approachA mixed-method approach is used in this study. First, using the fuzzy-set qualitative comparative analysis (fsQCA), the authors analyze 405 survey data across four industries in China and identify the configurations of financing instruments for supply chain cost reduction. Second, to better understand the reasons behind each configuration, the authors conduct the content analysis on the interview data composed of 24 Chinese companies.FindingsThe authors find that the effectiveness of SCF solutions for supply chain cost reduction is related to the focal company's use of traditional financing instruments. Moreover, compared with guaranteed financing, companies that use credit financing are more likely to adopt SCF solutions to achieve supply chain cost reduction. Finally, the effectiveness of SCF solutions in reducing supply chain costs varies greatly across industries.Practical implicationsThe study’s findings provide insights for policymakers and SCF practitioners in the aspects of simplifying the SCF application.Originality/valueThis study contributes to the current literature by addressing the theory–practice gap related to SCF. The study also provides new understandings of factors related to supply chain cost reduction, as well as factors that influence SCF adoption.

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“…Providing financing to a business partner in a supply chain is a common phenomenon across industries. Indeed, providing trade credit downstream from the supplier to the customer is being widely used for enabling sales and a scope of other motives (Balzenko and Vandezande 2003;Seifert et al 2013;Lam and Zhan 2021). However, financing the upstream direction, e.g., in the form of pre-payments, is less common and specific to certain industries.…”

Section: Introductionmentioning

confidence: 99%

Supply Chain Finance: Cost–Benefit Differentials under Reverse Factoring with Extended Payment Terms

Beyer

Herzog

2021

IJFS

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This article studies the effects of reverse factoring in a supply chain when the buyer company facilitates its lower short-term borrowing rates to the supplier corporation in return for extended payment terms. We explore the role of interest rate changes, rating changes, and the business cycle position on the cost and benefit trade-off from a supplier perspective. We utilize a combined empirical approach consisting of an event study in Step 1 and a simulation model in Step 2. The event study identifies the quantitative magnitude of central bank decisions and rating changes on the interest rate differential. The simulation computes with a rolling-window methodology the daily cost and benefits of reverse factoring from 2010 to 2018 under the assumption of the efficient market hypothesis. Our major finding is that changes of crucial financial variables such as interest rates, ratings, or news alerts will turn former win–win into win–lose situations for the supplier contingent to the business cycle. Overall, our results exhibit sophisticated trade-offs under reverse factoring and consequently require a careful evaluation in managerial decisions.

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The impacts of supply chain finance initiatives on firm risk: evidence from service providers listed in the US

Cited by 27 publications

References 87 publications

The relational focus of small and medium sized actors' understandings of supply chain finance (SCF)

The relational focus of small and medium sized actors' understandings of supply chain finance (SCF)

Configurations of financing instruments for supply chain cost reduction: evidence from Chinese manufacturing companies

Supply Chain Finance: Cost–Benefit Differentials under Reverse Factoring with Extended Payment Terms

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