In this paper we consider a two-level supply chain with a single retailer and a manufacturer, where both the firms are facing financial constraints and cannot produce/order their optimal quantity. Both manufacturer and retailer have opportunities to lend from two lenders. Firstly the lender make decisions on whether finance the manufacturer or retailer or both, Then decide the amount of loan and interest rate to minimize the risk and maximize profits. The manufacturer will decide on which lender to lend that makes two lenders compete with each other. Our work shows that the lender tend to finance manufacturer and retailer both and get a equilibrium interest rate. Periodic review echelon order-up-to policies are used to control the chain. Customer demand is imposed at end stock-points and, if unsatisfied, is backordered. We address this problem from a dynamic optimization of local decisions point of view, to ensure a global optimum for the supply chain performance.
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