Inventory financing in supply chains

Abstract

PurposeAgainst the background of the scanty knowledge about inventory financing in supply chains, the goal of this paper is to provide a conceptual explanation of the relevance and the implications of alternative inventory financing by a logistics service provider (LSP).Design/methodology/approachFirst, based on a literature review, inventory‐related conflicts of interest between actors in the supply chain are discussed. Second, a concept of inventory financing through an LSP is developed. Third, the concept introduced is illustrated by means of a numerical example.FindingsThe results of an illustrative example from Switzerland and a rough revenue and expenditure calculation highlight the effects that inventory financing through a logistics service provider may have for LSP. For the LSP profit depends mainly on the value and amount of the goods to be financed.Practical implicationsThe results of this paper can be applied to logistics service providers. The model developed can accordingly be used to calculate the additional effects of inventory financing service.Originality/valueThis research offers initial insights into the importance of inventory financing from an LSP perspective. As activities in this field may offer additional profits and differentiation options, decision makers at logistics service providers might want to estimate the potential resting in this expansion of their service catalogue.