A Research On The Financing And Operational Decisions In A Capital-constrained Supply Chain Under Buyback Contract

As the market competition and customization increasing, a supply chain has to facethe challenge of high market risks and financial risks, so all the enterprises in the supplychain should collaborate and make the operational decision together, in order to achievethe risk and benefit sharing in the capital-constrained supply chain. As the supply chainupstream enterprises, suppliers provide the buyback contract to share the market risk andcapital risk of retailers; whether the contract parameters can be effectively designed, itdetermines the effect of risk-sharing and revenue sharing. So this paper is attempt toincorporating the shortage of funds into the operational decisions.This paper discusses a two-level capital-constrained supply chain consisting of asupplier and a retailer under the buyback contract, and how the supplier optimizes the twocontract parameters (wholesale price and buyback price). We assume the demand for theperishable goods is stochastic and independent of the retail price, and the marketdistribution, production costs and selling prices are already known. We set up aStackelberg game under the ruturn policies in a capital-constrained supply chain. In theStackelberg game the suppliers, as a leader, design the buyback contract based on theretailer’s order strategy; the retailers with the capital-constrained, given the wholesaleprice and buyback price, decide the order quantity using the newsvendor-model. Throughthe numerical analysis and sensitivity analysis, we find out the buyback contract couldalso be used in the capital-constrained supply chain under certain conditions and be able toshare part of the financial risks of the capital-constrained retailers; moreover we concludethe interdependence of the buyback contract parameters, order strategy and the marketenvironment including the demand distribution and financing costs.