Managing supplier financial distress with advance payment discount and purchase order financing
| Autor: | Lima Zhao, Arnd Huchzermeier |
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| Rok vydání: | 2019 |
| Předmět: |
Marginal cost
Finance 021103 operations research Information Systems and Management Advance payment business.industry Purchase order Strategy and Management Supply chain 05 social sciences 0211 other engineering and technologies 02 engineering and technology Management Science and Operations Research Competition (economics) Capital (economics) ComputerApplications_GENERAL 0502 economics and business Financial distress Asset (economics) Business 050203 business & management |
| Zdroj: | Omega. 88:77-90 |
| ISSN: | 0305-0483 |
| DOI: | 10.1016/j.omega.2018.10.019 |
| Popis: | We examine a capital-constrained supply chain in which a small- and medium-sized enterprise (SME) supplier sells to an established retailer via a wholesale price contract. To mitigate the supplier's financial distress, the retailer chooses between two pre-shipment finance instruments: advance payment discount (APD) and buyer-backed purchase order financing (BPOF). When either APD or BPOF can be chosen, the retailer prefers APD to BPOF if her internal asset level is above a certain threshold. When both APD and BPOF are adopted, the retailer prefers APD and does not initiate BPOF unless the marginal cost of financial distress dominates the benefit of unit discount. We show that the financing equilibrium region of APD increases not only with the retailer's internal capital level, but also with demand variability. The interval and magnitude of the competition penalty incentivizes collaboration between supply chain partners. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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