Research On The Factoring Finance And Credit Sale Strategies Of Supply Chain

Credit sale is a commonly used trade form and a widely adopted settlement method in current market economy.In operation management literature,credit sale is often regarded as an efficient mechanism which can improve the performance of a supply chain by reallocating the revenues and the risks among supply chain participants.However,for the supplier,the accounts receivable generated from credit sale leads to a series of problems,such as capital turnover,receivables management and credit risk.As a comprehensive financial service including financing,guarantee,receivables management and risk assessment,factoring can help to solve the above-mentioned problems of the supplier.With the popularity of supply chain finance,factoring has developed significantly in recent years.Theoretically,many new questions arise when factoring finance is introduced to supply chain system.For example,how should the supplier and the retailer determine their pricing and ordering strategies to maximize expected profits when factoring prepayment is offered,what credit strategies should the factor execute to decrease the credit sale risk of the supplier,what are the effects of the risk control measures and multiple services of the factor on the credit sale decisions of the supply chain members.Consequently,basing on supply chain factoring practices,this work explores the joint decisions of supply chain participants on factoring finance and credit sale with the existence of the factor's risk control measures.We introduce the basic knowledge of factoring to show the main contents of this specific financing arrangement and the differences between factoring and other supply chain finance methods.The characteristics of credit sale under discounted transfer mode and limited credit mode are discussed,together with the effects of the factor's risk control measures on credit sale.And then,the factoring finance and credit sale decision-making problems under inter-chain competition are introduced.After that,we propose the framework of this work basing on the game order and decision variables of supply chains with credit sale and factoring finance.Considering the scenario that the factor takes receivables management as an ex-post risk control measure,we address the supplier's optimal credit sale price and the retailer's optimal ordering quantity under discounted transfer mode.More specially,in a supply chain system where the factor restrains credit risk furtherly by adding recourse arrangement in the factoring contract,a wholesale price contract model is established to work out the conditions under which the supplier will accept factoring contract and make a choice between recourse and non-recourse factoring.Next,how the equilibrium strategies of the supplier and retailer are influenced by factoring finance is explored under the case where the retailer is requested to provide certain amount prepayment as anti-guarantee of the repayment obligations.Moreover,the conditions that factoring is beneficial to the supplier are discussed.In addition,the effects of factoring finance on the performance of the supply chain are obtained through comparing with the cases without factoring.Considering the scenario that the factor takes credit line approval as an exante risk control measure,the optimal credit line of the factor and the optimal credit sale amount of the supplier under limited credit mode are examined.In particular,a game model between the supplier and the factor is established with the consideration of the retailer's credit level.The effects of the retailer's credit level on the factor's credit strategy are analyzed,together with the corresponding credit sale strategies that represent the riskness of the supplier's decisions.With the existence of bankruptcy costs,the characteristics of the supplier's credit sale strategies under high fixed bankruptcy cost and low bankruptcy costs are compared.Besides,the adjustment of the factor's credit line according to the factoring fee is also presented.Taking discounted transfer mode as an example,we investigate the credit sale strategies of supply chain members under factoring finance in a chain versus chain environment.The closed-form equilibrium operational solutions of the suppliers and retailers,as well as the equilibrium financial strategies of the suppliers,are obtained with respect to the case where only two symmetric supply chains exist.And then,an EPEC(Equilibrium Problem with Equilibrium Constraints)model is proposed to describe a more general case with multiple asymmetric competing supply chains.The corresponding numerical examples are also presented to achieve the optimal operational and financial strategies of each supply chain.A generalized supply chain consisting of a fashion manufacturer SD,an exclusive distributor RD(or RF)and a commercial bank BD is taken as an example to conduct case study.The data about the production costs,retail prices and the market demand are collected and used in established models to find the optimal strategies of each party under two kinds of trade conditions.We then analyze the effects of factoring finance on expected profits of the participants and the efficiency of the supply chain to provide scientific theory basis for the application of factoring finance in supply chain.