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

Abstract

This study is designed to solve supply chain inefficiencies caused by some members' financial problems, such as capital shortages and financing restrictions in a stochastic environment. To this end, we have established a supply chain finance framework by designing two novel coordinating contracts based on trade credit financing for different problem settings. These contracts are modeled in the form of multi-leader Stackelberg games that address horizontal and vertical competition in a supply chain consisting of multiple suppliers and a financially constrained manufacturer. However, previous studies in the trade credit literature have addressed only simple vertical competition, that is, seller-buyer competition. To solve the proposed models, two algorithms were developed by combining population-based metaheuristics, the Nash-domination concept, and the Nikaido-Isoda function. The results demonstrate that the proposed supply chain finance framework can eliminate supply chain inefficiencies and make a large profit for suppliers, as well as the financially constrained manufacturer. Furthermore, the results of the contracts’ analysis showed that if the manufacturer is required to settle its payments to suppliers before the end of the period, the trade credit contract cannot coordinate the supply chain because of a lack of incentive for suppliers. However, if the manufacturer is allowed to extend its payments to the end of the period, the proposed trade credit financing contract can coordinate the supply chain. Finally, the sensitivity analysis results indicate that the worse the financial status of the manufacturer, the more bargaining power suppliers have in determining the contract parameters for more profit.

Predicting the Intention to Adopt Innovation in Supply Chain Finance

“…Considering hypothesis 4, our study supports that PVRKM (Private Knowledge) positively influences the intention to predict innovation for supply chain financing. This corroborates with Emtehani et al (2023) that a comprehensive SCF framework by introducing two novel coordinating contracts that leverage trade credit financing was designed to address different problem settings within the supply chain. This is an example of an internal solution provided according to internal knowledge (Private Knowledge) to support the innovation process.…”

“…For instance, a robust Supply Chain Financial Logistics Supervision System was constructed by harnessing the power of Internet of Things (IoT) technology to examine the practical implementation of IoT technology in enabling customers to supervise the logistics process effectively (Liu et al, 2023). Also, a comprehensive supply chain finance (SCF) framework introducing two novel coordinating contracts that leverage trade credit financing was designed to address different problem settings within the supply chain (Emtehani et al, 2023).…”

Supply chain finance, firm performance and industry competition: empirical evidence from Pakistan

“…In supply chain finance, a core firm assists its customers and suppliers in payment terms as it helps a core firm build long-term relationships with its supply chain partners (Ma et al ., 2020). SCF also helps a firm to reduce inefficiencies at the supply chain level (Emtehani et al ., 2023). Providing financial assistance to s uppliers and customers helps a core firm to boost its performance.…”

Impact of Capital Position and Financing Strategies on Encroachment in Supply Chain Dynamics

“…Trade credit is an important practice in the supply chain for mitigating channel conflicts [3,4]. In addition, suppliers are more inclined to participate in the end consumer market when downstream retailers are financially constrained.…”