Supply Chain Finance Study:Advanced Payment Model Decision

Currently, information and cash do not match in the supply chain consisting ofsuppliers, dealers and distributors. It will seriously do harm to the performance of thewhole supply chain, furthermore the competitiveness of core enterprise. Therefore,study on "three flows" coordination inevitably becomes one of the important researchfields.Supply Chain Finance can solve the "third-flows" mismatch problems, comparedwith traditional financing. Consequently, it becomes a hot spot on theory and practice.The paper is focused on Advanced Payment Model of Supply Chain Finance.Composed with other Supply Chain Finance models, this model can effectivelycontrol the financial risks, solve financing constraints and difficulties faced by smalland medium sized business and meet the different needs of participants. Therefore,the model can be easily operated.Based on newsboy model, Advanced Payment Operation Model is built. Thispaper does research on the important design parameters of the contract quantitatively,providing suggestions to the participants on pre-contract negotiation stage and riskcontrol recommendations on post-contract stage. Finally, the model is applied toAdvanced Payment Model carried by CMML.Specifically, this paper is focused on the following three aspects:(1) Added credit risk factors of suppliers, build Advanced Payment DecisionModel, study on risk-free probability, the highest pledge rate, profits of participants,and the highest buy-back guarantee rate quantitatively.(2) Based on Advanced Payment Decision Model, study on the case bynumerical analysis, show decision-making process of all parties, find the sensitivefactors concerning unilateral making-decision and decision-making parameter,provide basis for contract design and control, compare banks with suppliers ondifferent decisions.(3) Do SWOT Analysis on Advanced Payment Model carried by CMML, supply corresponding combination measures, propose four operating models under thepremise of the strategic positioning of China Merchants Holdings International, dorisk control analysis on different roles of CMML, provide suggestions on AdvancedPayment Operation Model carried by CMML.