Foundations and Trends® in Technology, Information and Operations Management > Vol 12 > Issue 2-3

Material and Cash Flow in Two-Tier Supply Chain with Trade Credits and Defaults

Mabel C. Chou, National University of Singapore, Singapore, bizchoum@nus.edu.sg Chung-Piaw Teo, National University of Singapore, Singapore, bizteocp@nus.edu.sg Yuan-Guang Zhong, South China University of Technology, China, bmygzhong@scut.edu.cn
 
Suggested Citation
Mabel C. Chou, Chung-Piaw Teo and Yuan-Guang Zhong (2019), "Material and Cash Flow in Two-Tier Supply Chain with Trade Credits and Defaults", Foundations and Trends® in Technology, Information and Operations Management: Vol. 12: No. 2-3, pp 119-134. http://dx.doi.org/10.1561/0200000081

Published: 14 Mar 2019
© 2019 M. C. Chou, C.-P. Teo and Y.-G. Zhong
 
Subjects
 
Keywords
G32 Financial Risk and Risk ManagementM11 Production management
Risk managementHedgingOperational riskSupply chain finance
 

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In this article:
1. Motivation and Description of the Problem
2. Modeling Approach and Methodology
3. Numerical Results and Management Insights
4. Future Research
References

Abstract

We develop a supply chain finance and inventory model to understand how trade credit terms affect a firm’s financing costs and inventory decision along the supply chain. In particular, we study the following question: how should a warehouse (or distributor) receiving trade credits from an external supplier share and extend the trade credit terms to her customers (i.e. retailers)? How does this financial flow affect the replenishment decisions (i.e. material flow) in the system? We use the classical echelon inventory approach to synthesize the effects of trade credits in a one-warehouse-multi-retailer system. Payment default from retailers are considered and trade credit limit is used as a risk management tool. Interestingly, we show that longer credit terms from the external supplier may not necessarily translates into longer credit terms for the retailers in some supply chain environments.

DOI:10.1561/0200000081
ISBN: 978-1-68083-554-0
298 pp. $99.00
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ISBN: 978-1-68083-555-7
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Table of contents:
Introduction and Conceptual Overview of Contents
Part 1: Supply Chain Finance
Material and Cash Flow in Two-Tier Supply Chain with Trade Credits and Defaults
Financing Suppliers under Performance Risk
Blockchain and other Distributed Ledger Technologies in Operations
Cash Beer Game
Part 2: Financial Hedging and Commodity Risks
A Framework of Hedging Decisions for Supply Chain Partners
Data and Risk Analytics for Production Panning
Risk Management in Commodity Processing Firms: An Equilibrium View
Quadratic Hedging of Commodity and Energy Cash Flows
Optimal Positioning in the Derivative Market: Review, Foundations, and Trends
Part 3: Operational Strategies and Risk Management
Corn, Soybean or Fallow: Dynamic Farmland Allocation Under Uncertainty
Disruption Risk Management in Serial Multi-Echelon Supply Chains: Where to hold Risk Mitigation Inventory and Reserve Capacity
Financial Incentives to Avoid Major Quality Problems in a Supply Chain
Specific Capacity Investment in Supply Chains with Renegotiation

Emerging Technology & Advances in Supply Chain Finance & Risk Management

Emerging Technology & Advances in Supply Chain Finance & Risk Management reflects the state-of-the-art in research thought leadership in supply chain finance and risk management, and it contains great expository pieces on how advanced technologies are shaping supply chains and risk management within them. You will also find ideas on how supply chain finance and risk management can be best taught in our classrooms.

The volume is divided into three parts, each part reflecting a major active research area of the field including: Part 1: Supply Chain Finance; Part 2: Financial Hedging and Commodity Risks; Part 3: Operational Strategies and Risk Management.

Part 1 deals with the broad area of supply chain finance and programs that will better allow for working capital management within supply chains. Part 2 introduces concepts of hedging financial and operational risks due to uncertain commodity prices, fluctuating exchange rates, and volatile interest rates. Emphasis is placed on understanding how financial hedges can be used for hedging relevant supply chain risks in a way that reflects modern view of financial risk management. Part 3 examines topics and solution approaches reflecting the more traditional treatments in the contemporary literature of operational and supply chain risks. This volume provides rich implications for future research directions in efforts to master the new complexities and uncertainties of the global business environment and better understand the impact of advanced technologies in global supply chains.

 
TOM-081

Companion

Foundations and Trends® in Technology, Information and Operations Management, Volume 12, Issue 2-3 Special Issue: Emerging Technology & Advances in Supply Chain Finance & Risk Management
See the other articles that are also part of this special issue.