Financing strategies for a textile and apparel remanufacturing supply chain with the delay in disbursement subsidies

Abstract

The remanufacturing of end-of-use textile and apparel (T&A) products can reduce greenhouse gas emissions, and remanufacturing by third-party remanufacturers (TPRs) is one of the most common remanufacturing models. Governments have incentivized companies to remanufacture discarded T&A products and subsidize them by enacting diverse policies, but these subsidies often lag behind upfront investments, and several TPRs in this industry often confront financial constraints and need to seek financing. Along this line, we have established a T&A remanufacturing supply chain that includes a well-funded Original Equipment Manufacturer (OEM), which manufactures and sells new T&A products, and a capital-constrained TPR, which is licensed by the OEM to remanufactures end-of-use T&A products. OEM financing and subsidy-based confirmation financing, are considered on top of the benchmark model without financing to the TPR. The results of the research show that initial operating capital level and unit remanufacturing cost are two key factors influencing the choice of TPR financing. When the initial operating capital shortfall is small, it is more advantageous for the TPR to cut down production accordingly by maxing out her in-house capital rather than to obtain loan from a well-funded OEM or bank. When TPR's unit remanufacturing cost is low, it is advisable for TPR to secure a loan from the bank (OEM) under moderate (low) capital shortfall. When the unit remanufacturing cost of TPR is moderate, OEM financing becomes a preferable option for the TPR if its capital shortfall is relatively large.