The influence of supply chain financing on operation decisions

Details

Supervisors

Agrell, Per Joakim

Faculty

Louvain School of Management

Degree label

Master [120] en Ingénieur de gestion

Abstract

Supply chain financing modes are increasingly investigated in the literature as means to optimize firms cash flow. However few emphasis have been done to understand the risk-taking behavior of agents involved in supply chain financing. We attempt to alleviate this gap by exploring the impact of supply chain financing on the risk taking behavior of members of the supply chain and its consequence. We propose a newsvendor model involving a cash-constrained retailer financed through trade credit by a supplier, which itself relates on an external financing through bankloan. We explore the behavior of actors of the supply chain with respect to different consideration such as variability, risk aversion or bankruptcy risk, under limited liability assumption. We finds overall that supply chain financing leads to an increased leverage of the supply chain and induce actors to increase their exposure to adverse outcomes when making their operational decision. These results provides insight on the needs for decrease information asymmetry between external financier and the members of the supply chain financing arrangement.