Different Financing Strategies In Supply Chain With Capital Constraints:Working Capital,Credit Rating

With the development of supply chain finance,there exist many different financing strategies in supply chain.With the development of credit system,we can differentiate the pricing of financing based on credit situation of enterprises in supply chain.Therefore,it is meaningful to study different supply chain financing strategies and discuss financing pricing based on enterprise's credit in supply chain.We consider four financing strategies in a supply chain with a capital constrained supplier and a capital constrained retailer.The four financing strategies are no financing,bank financing separately,trade credit,supplier's guarantee.We assume that the interest rate of bank loan is fair priced with an interest rate charges related to the borrower's credit situation.By comparing the equilibrium decisions of operation and financing under the four financing strategies,we find that:(1)Both the supplier's and retailer's performance can be enhanced under bank financing strategy,trade credit strategy,supplier's guarantee strategy at a lower retailer's working capital level.(2)Collaborative strategies of trade credit and supplier's guarantee with a lower retailer's working capital level may dominate other strategies in the optimal order quantity,profit of the supplier and the whole supply chain,whereas the reverse holds for the retailer.Retailer at a lower working capital level may prefer bank financing,while retailer at a medium working capital level may use collaborative strategies.Trade credit is always favored by the supplier and the whole supply.(3)The better the credit situation is,the more favorable the trade credit suppliers,guaranteed retailers are to the performance of the supply chain.Enterprises under bank financing strategy prefer supply chain partners with good credit situation and supplier with good credit situation is always welcomed.There are no sufficient incentives for the retailer to improve his credit situation under bank financing strategy and supplier's guarantee strategy.(4)Increasing the working capital of the capital-constrained party in supply chain can at least increase profits of its own and the whole supply chain.The increase of the capital-constrained supplier's working capital is always profitable,while increasing the capital-constrained retailer's working capital will increase its profits but decrease the higher profit of the supplier and the whole supply chain under collaborative financing.(5)The benefit of retailer's working capital decrease with interest rate charges of retailer under bank financing strategy,increase with guarantee rate under supplier's guarantee strategy.(6)With bankruptcy risk,the bank interest rate decreases with borrowers' working capital under bank financing strategy,decreases with working capital of the whole supply chain under collaborative strategies.