Supply chain finance-based payment scheme strategies in a pull supply chain

Abstract

A pull supply chain can reduce unnecessary inventory and lower carbon emissions. However, suppliers' capital constraints in the pull supply chain hinder their production and may disrupt the entire supply chain, limiting participants' efforts in sustainability actions. To alleviate this situation and motivate upstream and downstream enterprises in the supply chain to reduce carbon emissions for sustainable development, many core companies or financial institutions have employed payment-term-based supply chain finance (SCF) mechanisms such as carbon trade financing, including advanced payment, delayed payment, and reverse factoring. In this study, we acquire the optimal decisions for the supplier and manufacturer under each model and investigate the impacts of different payment schemes on the performance of individuals and the entire supply chain. In addition to reducing carbon emissions to promote sustainability goals, these payment mechanisms are also profitable. By comparing SCF-based payment schemes with the classic bank at-once payment, we show that the optimal payment scheme depends on financing priority. Furthermore, SCF-based payment schemes enhance profit efficiency in response to increasing demand fluctuations. The findings of our study provide insights for supply chain participants to choose the best payment-term-based SCF programmes to optimise operations, enhance their profitability, and achieve sustainable development.

Keywords:

• Supply chain finance
• payment schemes
• pull supply chain
• carbon finance
• game theory

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data Availability Statement

Data will be available upon request.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China under Grant [72232002] and [71872051].

Notes on contributors

Chenyu Wang

Wang Chenyu is a Ph.D. student in the Department of Management Science, School of Management, Fudan University. She is currently a visiting Ph.D. student at NUS Business School, Institute of Operations Research and Analytics. She received her bachelor's degree in Management from Fudan University in 2015. Her current research interests include supply chain management, supply chain finance, operational management, and platform economy. She has published her article in Supply Chain Management: An International Journal.

Xun Xu

Xun Xu holds a PhD in Operations Management from Washington State University. He is currently an Associate Professor in the Department of Information Systems and Operations Management at California State University, Dominguez Hills in the United States. His research interests include service operations management, supply chain management and coordination, sustainability, e-commerce, data and text mining, and hospitality and tourism management. He has published over seventy papers in such journals as Annals of Tourism Research, Computers and Industrial Engineering, Decision Sciences, Decision Support Systems, European Journal of Operational Research, Information and Management, International Journal of Contemporary Hospitality Management, International Journal of Electronic Commerce, International Journal of Hospitality Management, International Journal of Information Management, International Journal of Production Economics, International Journal of Production Research, Journal of Business Research, Journal of the Operational Research Society, Journal of Travel Research, Omega, Technovation, and Transportation Research Part E.

Xiangfeng Chen

Xiangfeng Chen is a Professor in the Department of Management Science, Fudan University and director of Fudan University International Supply Chain Finance Research Centre. He received the Ph.D. degree in Management Science and Engineering from Fudan University in 2002. He served as an international faculty fellow at MIT in 2012 and a postdoctoral research fellow at Stern School at NYU in 2006-2007. He was the recipient of the Chang Jiang Scholars Program from the Ministry of Education of the People's Republic of China in 2015. He has published in Manufacturing & Service Operations Management, Production and Operations Management, European Journal of Operational Research, Omega, International Journal of Production Research, and International Journal of Production Economics, among others. His current research interests include supply chain finance, supply chain innovation, smart supply chain, etc.