Abstract
Purchase order financing (POF) and buyer direct financing (BDF) are both innovative financing schemes aiming to help financial constrained suppliers secure financing for production. In this paper, we investigate the interaction mechanism between suppliers’ financing strategy selection and manufacturers’ loans offering strategy adoption under two innovative financing schemes. We developed an evolutionary game model to effectively investigate the interaction mechanism between suppliers and manufacturers and analyzed the evolutionary stable strategies of the game model. Then we used system dynamics to present the performance of the evolutionary game model and took a sensitivity analysis to verify the theoretical results. The main conclusions are as follows: in the supply chain, to deal with the noncooperation among suppliers and manufacturers on innovative financing schemes, the revenue of manufacturers, the rate of manufacturer loan, and the proper financial risk factor should be relatively high.
Highlights
To reduce operating costs, many manufacturers in developed regions purchase source from small suppliers
Given a fixed value of the bank loan rate, the high value of financial risk factor brings about the high proportion of selecting strategy pair (BF, buyer direct financing (BDF))
When cm > 0.2, given a fixed value of the manufacturer loan rate, the high value of financial risk factor brings about the high proportion of selecting strategy pair (BF, BDF)
Summary
Many manufacturers in developed regions purchase source from small suppliers. E other way is turning down the orders from reputable manufacturers because these manufacturers can offer direct financing or guarantee for suppliers to obtain the bank loans [3]. By using EGT to develop a novel model under two innovative financing schemes, manufacturers have two types of choices—BDF (buyer direct financing) and POF (purchase order financing)—and suppliers have two strategies—BF (bank financing) and MF (manufacturer financing). When suppliers choose MF (manufacturer financing) strategy, they will obtain loan from the manufacturer which offers two innovative financing schemes (BDF and POF). By using the evolutionary game, this study is for analysis of the long-term behaviors of the two innovative financing schemes of populations of manufacturers and suppliers considering the financial risk.
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