The Influence of Supply Chain Finance on Inventory Management Under Supply Uncertainty

摘要

It's well known that small and medium-sized enterprises(SMEs) occupy a significant position in Chinese economy. However, in credit practices, SMEs are often considered as high-risk lenders who often need to pay higher capital costs to obtain funds. This paper explores (1) debt financing can distort a retailer's inventory decision when the retailer with limited funds and selling multiple products with different price, cost, revenue, and yield uncertainty parameters; (2) we also explore the role of each parameter in this distortion. Because of the limited liability, a debt-financed retailer prefers items with high selling price, high penalty factor(late delivery) and low salvage value. Furthermore, based on the fact that the capital cost of suppliers has always been higher than that of banks, we discuss that this distortion can be mitigated when the financing is provided by the supplier who can observe the actual order quantities before determining the credit terms. Besides, borrowing goods instead of borrowing cash limits the retailer's ability to deviate from the first-best inventory decision. On the other hand, based on the fact that the capital cost of suppliers has always been higher than that of banks, we studied the combination of bank and supplier financing to enable retailers to achieve the best way of financing.