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Optimal operational decisions when a manufacturer offers trade credit to his retailer |
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| Authors: | Dan Shi Yongjian Li Xiaoqiang Cai |
| Institution: | 1. China Academy of Corporate Goverance, Nankai University, Tianjin, 300071, China 2. Business School, Nankai University, Tianjin, 300071, China 3. Department of Systems Engineering & Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong |
| Abstract: | In this paper, we develop models to determine operational and financial decisions of a supply chain under the condition that the retailer faces a financial constraint and the manufacturer can offer trade credit to assist the retailer. We first study the case where the retailer is risk-neutral, and derive the optimal ordering and financial decisions. Then, the case where the retailer is risk-averse (downside risk) is studied and the effects of the risk on the retailer and manufacturer’s operational and financial decisions are discussed. Finally, numerical examples are provided to conduct managerial analysis. |
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