A study on green supply chain under capital constraint considering time-varying salvage value

Abstract

To reduce environmental pollution and promote sustainable development, more and more suppliers are committed to producing more environmentally friendly products such as green electrical appliances through a green supply chain (GSC) system. However, some suppliers are often limited by a lack of funds in the production and supply process. In this paper, buyer-supported purchase order financing (BPOF) and advance payment discount (APD) are adopted to help the supplier successfully produce green products in a GSC system consisting of a financially constrained supplier and a reputable retailer. Moreover, the salvage values of unsold inventory in most traditional models are fixed, but in real life, the salvage value tends to be time dependent. Therefore, how the time-varying salvage value affects the operation and financing decisions as well as the profit risks is studied. We find that the clearance time of the unsold items affects the optimal order quantity and the supplier's discount rate and the financial institution's optimal interest rate. In addition, the financing equilibrium is BPOF under certain conditions, and the profit risks of the retailer and the entire supply chain are increasing with the order quantity and the clearance time. Finally, our results are verified through numerical analysis.

KEYWORDS:

• Green supply chain
• financial management
• supply chain management
• time-varying salvage value
• capital constraint

Disclosure statement

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

Additional information

Funding

The work described in this paper was supported by grants from The Natural Science Foundation of China (grant number 71971143); The Research Committee of Hong Kong Polytechnic University (Project Numbers G-UADM; G-UAFS; Student account code RK2C).

Notes on contributors

Song-Man Wu

Song-Man Wu received the M.S. degree in management science and engineering from Shanghai University, Shanghai, China, in 2018. She is currently working toward a Ph.D. degree with the Department of Industrial and Systems Engineering, Hong Kong Polytechnic University, Hong Kong. Her research interests include operations management, supply chain management, supply chain finance, quality management, and decision-making theory and application, etc. She has published 6 international journal papers, including the International Journal of Production Research, International Transactions in Operational Research, IEEE Transactions on Engineering Management, Total Quality Management & Business Excellence, International Journal of Computational Intelligence Systems, etc.

Prof. Felix Chan received his BSc Degree in Mechanical Engineering from Brighton University, UK, and obtained his MSc and PhD in Manufacturing Engineering from the Imperial College of Science and Technology, University of London, UK. Prior joining PolyU, Prof. Chan has many years of working experience in other universities including University of Hong Kong; University of South Australia; University of Strathclyde. His current research interests are Logistics and Supply Chain Management, Operations Research, Production and Operations Management, Distribution Coordination, Smart Manufacturing, AI Optimisation. To date, Prof. Chan has published over 16 book chapters, over 370 SCI refereed international journal papers and 310 peer reviewed international conference papers. His total number of citations > 10700, h Index= 53. Prof. Chan is a chartered member of the Chartered Institute of Logistics and Transport in Hong Kong. Based on the recent compilation (2020) from a research group of Stanford about the impact of scientists (top 2% listed). The work is published in the following website: https://journals.plos.org/plosbiology/article?id=10.1371/journal.pbio.3000918. Prof. Felix Chan is categorised in the field of Operations Research, ranked 10 out of 23,455 scientists worldwide, i.e. Top 0.04% worldwide.

S.H. Chung

Sai-Ho Chung, PhD, is an Associate Professor and Associate Head at the Industrial and Systems Engineering at the Hong Kong Polytechnic University. He obtained his PhD degree from the University of Hong Kong. His research interests include operations research in logistics and supply chain management, supply chain collaboration, production scheduling, distributed scheduling, distribution network, etc. Dr Chung has published over 100 SCI journal papers. He has been guest editing many special issues of Transportation Research Part E, International Journal of Production Research, etc.