Financing Supplier Through Retailer's Credit

• 成果类型: Article
• 署名作者: Zha, Yong; Chen, Kehong; Dong, Lingxiu; Yu, Yugang
• 署名单位: Chinese Academy of Sciences; University of Science & Technology of China, CAS; Chinese Academy of Sciences; University of Science & Technology of China, CAS; Chinese Academy of Sciences; University of Science & Technology of China, CAS; Washington University (WUSTL)
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1177/10591478241231869
• 发表日期: 2024
• 页码: 721-736
• 关键词: Newsvendor; retailer-sponsored financing; Trade credit; advance payment; financing supplier

摘要

This study examines two retailer-initiated pre-shipment financing programs to assist capital-constrained suppliers in securing external funds for production. The first program is retailer-sponsored financing (RSF), an emerging practice in developing economies. Under RSF, the retailer commits to sharing the loan repayment obligation with the supplier by agreeing to pay up to a specific portion of the supplier's bank loan repayment. The second program is advance payment (AP), a common payment arrangement wherein the retailer pays a part of the wholesale amount upfront to support the supplier's production costs. We analyze a supply chain comprising a supplier and retailer. The retailer must choose between offering RSF, AP, or neither. Without RSF or AP, the supplier must opt for bank-direct financing when it is short of funds and bear the full responsibility of repaying the loan principal and interest. Our findings reveal a divergence in supplier and retailer preferences. Specifically, the supplier favors RSF as it not only lowers the marginal production cost but also permits the supplier to charge a higher risk premium to the retailer compared to AP. Conversely, the retailer prefers AP primarily due to the latter reason. Our research underscores the significance of RSF as a distinct financing alternative, enabling retailers to aid a supplier segment that cannot rely solely on AP. RSF also proves to be advantageous for banks by expanding their supplier clientele and boosting their lending volume. Interestingly, the supplier's and retailer's bankruptcy risks tend to have opposite impacts on the value of RSF.