The Simulation Of The Supply Chain Contract In The Prepayment Financing Mode

With the acceleration of the global economic integration, supply chainmanagement has become an effective competitive method among the enterprises.Supply chain management is to meet the needs of the customers and help the wholesupply chain to minimize the costs and maximize the revenue. But in the actualoperation, the core enterprise intend to implement a strategy in its own interests,resulting in a damage to the whole chain. Therefore, many theoretical and practicalresearches provide guidance to help the SMEs (which stands for small and mediumenterprises) in the supply chain to get funds to solve the financing difficulties.Meanwhile, how to introduce contract theory to solve the financial institutions and theinconsistencies between the objectives in the chain is particularly important.This paper studies the supply chain coordination with contract under financialconstraints, the models of manufacturer-retailer are found based on one financingmechanism—prepayment financing mode, and two supply chain contract—the wholeprice contract(referred as “wpc”) and revenue sharing contract(referred as “rsc”).Under this research we compare the two different contracts to find which contract canimprove the revenue of the supply chain and the SME’s capital operation. Considerthe traditional methods of mathematical modeling to build more complex dynamicsystem is a big difficulty, this paper choose System Dynamic theory to solve thisproblem in reference to previous studies. The System Dynamic theory depicts thesupply chain system according to the causal relationship between the internalvariables, it can also get the feedback and delay model lacked in the traditionalresearch.In this paper, we reviewed the research of Contract Theory, Supply ChainFinance theory and System Dynamics theory. Based on synthesized analysis of theintrinsic association between the structure of the system and the relationship of thekey variables in this system, we analyzed the change of parameters by way ofsimulating, comparing the profits of the supply chain system in the end of the period.And, we discussed the efficiency of capital operation of the retailer in differentpurchasing decisions and the proportion of loan repayments。We found that the supplychain system could gain more interest in the model of revenue sharing contract，whose efficiency of capital operation, however, is better than that in the model of wholeprice contract only in one case.