Decisions on capital-constrained supply chains with credit guarantees and bankruptcy costs

Abstract

A supply chain financing model that the core supplier provides credit guarantee for the capital-constrained retailer to bank loans is concerned. The model takes the credit guarantee, bankruptcy cost, and salvage value of products into account, and analyzes the decision-making behaviors of supply chain participants, including the bank. The optimal decisions of order quantity, wholesale price, loan interest rate and bankruptcy threshold are obtained, as well as the relationship between these decisions and other factors. Results show that the supplier can adjust the credit guarantee coefficient to increase its profit and lower the profit of the retailer, which will cause instability in the supply chain. Then the joint contract of revenue-sharing and fixed payment is designed. Under this contract, the profit of each supply chain member can be improved, but the revenue-sharing contract and the fixed payment contract alone cannot achieve this effect.