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A cash-constrained stochastic inventory model with consumer loans and supplier credits: the case of nanostores in emerging markets

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  • Y. Boulaksil
  • A.C.C. van Wijk

Abstract

We consider a small traditional retailer that is managing its inventory under strict cash constraints, mainly because typically informal loans are offered to customers. These stores are widely present in emerging markets, and we refer to them as nanostores (also called ‘mom-and-pop stores’). As the suppliers require immediate payments for goods delivered, a nanostore can only replenish products to the level for which it has on-hand cash available. To improve delivery efficiency, a supplier might offer a nanostore credit for its replenishments. However, currently, suppliers are often reluctant to do so as these nanostores quickly go bankrupt or disappear, hence defaulting on all outstanding credits. The objective of this paper is to determine when it is beneficial to offer supplier credits. We propose a multi-period, stochastic inventory model, and numerically compare scenarios with and without supplier credits. Our study shows that even in the presence of this risk, suppliers often have good incentives to provide these credits, even if interest is not incurred. For this to hold, the operations of the retailer should be (a little) profitable in the first place, for which we provide analytical conditions.

Suggested Citation

  • Y. Boulaksil & A.C.C. van Wijk, 2018. "A cash-constrained stochastic inventory model with consumer loans and supplier credits: the case of nanostores in emerging markets," International Journal of Production Research, Taylor & Francis Journals, vol. 56(15), pages 4983-5004, August.
    • Handle: RePEc:taf:tprsxx:v:56:y:2018:i:15:p:4983-5004
    DOI: 10.1080/00207543.2018.1424368
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    Cited by:

    1. Sun, Shuxing & Zhang, Bin, 2022. "Operation strategies for nanostore in community group buying," Omega, Elsevier, vol. 110(C).
    2. Vidal Vieira, José Geraldo & Ramirez Navarro, Hector Angel & Fransoo, Jan C., 2021. "Understanding urban logistics and consumer behavior in São Paulo city," Other publications TiSEM 26630a72-a59e-4502-ab56-c, Tilburg University, School of Economics and Management.
    3. Boulaksil, Youssef & Fransoo, Jan C. & Blanco, Edgar E. & Koubida, Sallem, 2019. "Understanding the fragmented demand for transportation – Small traditional retailers in emerging markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 130(C), pages 65-81.
    4. David Hidalgo-Carvajal & Edgar Gutierrez-Franco & Christopher Mejia-Argueta & Helen Suntura-Escobar, 2023. "Out of the Box: Exploring Cardboard Returnability in Nanostore Supply Chains," Sustainability, MDPI, vol. 15(10), pages 1-16, May.
    5. Rafael Escamilla & Jan C. Fransoo & Christopher S. Tang, 2021. "Improving Agility, Adaptability, Alignment, Accessibility, and Affordability in Nanostore Supply Chains," Production and Operations Management, Production and Operations Management Society, vol. 30(3), pages 676-688, March.
    6. Shin, Youngchul & Lee, Sangyoon & Moon, Ilkyeong, 2020. "Robust multiperiod inventory model considering trade-in program and refurbishment service: Implications to emerging markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 138(C).
    7. Khakbaz, Amir & Mensi, Walid & Tirkolaee, Erfan Babaee & Hammoudeh, Shawkat & Simic, Vladimir, 2023. "The combined effects of interest and inflation rates on inventory systems: A comparative analysis across countries," International Journal of Production Economics, Elsevier, vol. 266(C).
    8. Chen, Zhen & Rossi, Roberto, 2021. "A dynamic ordering policy for a stochastic inventory problem with cash constraints," Omega, Elsevier, vol. 102(C).
    9. Chen, Zhen & Archibald, Thomas W., 2024. "Maximizing the survival probability in a cash flow inventory problem with a joint service level constraint," International Journal of Production Economics, Elsevier, vol. 270(C).

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