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Optimal ordering and financing decisions under advance selling and delayed payment for a capital-constrained supply chain

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  • Wei Jin
  • Jianwen Luo
  • Qinhong Zhang

Abstract

We compare two different financing strategies, advance selling, and delayed payment, for a supply chain with a capital-constrained retailer facing uncertain demand. We firstly establish the retailer’s optimal ordering and financing decisions under advance selling and delayed payment, respectively. In case of advance selling, we find that a strikingly different price discount rate should be adopted when the retailer changes to being capital-constrained. In case of delayed payment, we analytically investigate the impact of the retailer’s capital level on her own performance. Furthermore, we identify the conditions under which advance selling strategy or delayed payment strategy is preferable. In particular, advance selling strategy is preferable for the retailer when she is sufficiently capital-constrained or customers are relatively price sensitive; In contrast, delayed payment strategy is preferable for the supplier and the entire supply chain when the retailer is sufficiently capital-constrained.

Suggested Citation

  • Wei Jin & Jianwen Luo & Qinhong Zhang, 2018. "Optimal ordering and financing decisions under advance selling and delayed payment for a capital-constrained supply chain," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 69(12), pages 1978-1993, December.
    • Handle: RePEc:taf:tjorxx:v:69:y:2018:i:12:p:1978-1993
    DOI: 10.1080/01605682.2017.1415643
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    Cited by:

    1. Choi, Tsan-Ming & Shi, Xiutian, 2022. "Reducing supply risks by supply guarantee deposit payments in the fashion industry in the “new normal after COVID-19”," Omega, Elsevier, vol. 109(C).
    2. Huanyong Zhang & Huiyuan Xu & Xujin Pu, 2020. "Comparisons of Pre-Sale Strategies for a Fresh Agri-Product Supply Chain with Service Effort," Agriculture, MDPI, vol. 10(8), pages 1-20, August.
    3. Zhen, Zhiyuan & Jiang, Lan & Yan, Qiang, 2024. "The evolution of portfolio financing equilibrium in a risk-averse supply chain under a partial trade credit policy," Finance Research Letters, Elsevier, vol. 62(PA).
    4. Qinglin Luo & Jianwen Luo, 2024. "Financing equilibrium in an after-sales service supply chain," Operational Research, Springer, vol. 24(3), pages 1-30, September.
    5. Yongming Zhang & Weida Chen, 2022. "Optimal production and financing portfolio strategies for a third‐party remanufacturing supply chain with capital constraint," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 3072-3094, October.
    6. Daehyeon Park & Doojin Ryu, 2023. "E‐commerce retail and reverse factoring: A newsvendor approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 416-423, January.

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