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1Ivey Business School, Western University, Canada; 2School of Business, Sun Yat-sun University; 3CUHK Business School, The Chinese University of Hong Kong; 4McCombs School of Business, The University of Texas at Austin
We study the role of financing in establishing supply chain (SC) sustainability. We consider an SC where a buyer sources from a financially constrained supplier, who borrows from either a bank or the buyer. We show that both bank financing and buyer financing cannot simultaneously manage SC sustainability and profitability. We thus propose an alternative, in which the supplier borrows from a bank but the buyer offers a reward if the supplier passes the audit, and demonstrates its effectiveness.
Retailer-initiated inventory-based financing
Hongyu Chen1, Weiming Zhu2
1Peking University; 2IESE Business School, Spain
We study the contract design and the effectiveness of the retailer initiated inventory-based financing (IBF) scheme. Using a game-theoretical model, we derive the small retailer’s optimal inventory ordering and pledging decisions during the stockpiling phase and characterize the optimal interest rate for the large retailer. We also empirically study the small retailer’s borrowing pattern and estimate the impact of the interest rate on the small retailers’ planning horizon and the loan amount.
