Ordering And Financing Policies For Cash-constrained Retail Enterprise Under Transshipment

This paper models inventory management of retailers with financial constraints undertransshipment, especially studies how transshipment affect bank and retailers, consideringboth exogenous and endogenous interest rate when retailers borrow from bank. For adistribution system where a retail enterprise has many retailers in different location sellingthe same product under multivariate normal demand distribution. When one retailer is outof products while another one has, they can transship it. And when retail enterprise can’tmatch the market, it can borrow from bank.In the case of bank being a interest rate taker, we provide several analytical resultsregarding the effects of key parameters on order quantities with transshipment or withouttransshipment, as well on profits of Retail enterprise and bank. We find retail enterprisebenefits from lower demand correlation, and transshipment can reduce the order quantities,at the same time order quantities and bank profit increase when demand correlationincrease with lower interest rate. In the case of the bank being a rate setter, we characterizethe Stackelberg game that arises, and provide several insights into how the game dynamicsare affected by transshipment. We find Stackelberg game has the unique answer in somecondition, and bank tends to set higher rate which decreases order quantities, whiletransshipment can induce retailers to order more. As the results, bank can benefits moreform transshipment. And bank profit increases with demand correlation increasing withthe game balance.