Financing the Three-Tier Supply Chain: Advance Payment vs. Blockchain-Enabled Financing Mode

Abstract

Supply chain finance has shown remarkable results in alleviating the financial constraints of small and medium-sized enterprises. However, most studies have concentrated on the two-tier supply chain while ignoring the financing issues of the deep-tier supply chain. This study introduced the blockchain-enabled financing mode now utilized in the manufacturing industry and constructed a three-tier agricultural supply chain considering the farmer’s financial constraints. The main contributions of this article are (1) presenting the blockchain-enabled financing mode in the three-tier agricultural supply chain and (2) investigating supply chain decision-making in the three-tier supply chain when the tier-2 supplier is financially constrained, comparing advance payment and the blockchain-enabled financing mode. Relevant parameter estimations were realized using the data of the last ten years, and numerical analyses were conducted. The results show that when the farmer’s bank’s financing capability exceeds the acquirer’s, the farmer is motivated to select the blockchain-enabled financing mode. However, a win-win situation among the three-tier supply chain is only achievable when the transmission-fee rate falls within a particular range. In addition, if government agencies wish to promote blockchain technology by subsidizing blockchain-enabled financing, they might support the farmer in obtaining a bank loan at a cheaper interest rate. All members of the supply chain would benefit from this.