A Mutual-Aid Mechanism for Supply Chains with Capital Constraints
Hongjun Peng & Tao Pang (2019) A mutual-aid mechanism for supply chains with capital constraints, International Journal of Management Science and Engineering Management, 14:4, 304-312, DOI: 10.1080/17509653.2019.1578275
16 Pages Posted: 12 Nov 2016 Last revised: 6 Dec 2020
Date Written: June 6, 2016
We consider a supply chain in which both the supplier and the distributor experience capital constraints. Due to the capital constraints, the supplier faces a capital deficit during the production period and the distributor faces a capital deficit during the sales period. Under bank loan financing, we derive the optimal strategies for both the supplier and the distributor. Then we propose a mutual-aid mechanism under which the distributor provides an advance payment to the supplier during the production period, and the supplier offers a deferred payment trade credit to the distributor during the sales period. As the demand is uncertain, there is a bankruptcy risk with the distributor, which is taken into consideration in our model. We develop a Stackelberg game model and derive the optimal strategies under the mutual-aid mechanism. Our results indicate that, the mutual-aid mechanism can improve the profits for both the supplier and the distributor, comparing to bank loan financing case.
Keywords: Supply chain; Mutual-aid mechanism; Advance payment; Deferred payment.
JEL Classification: C44, M11
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