Optimal production and financing portfolio strategies for a capital-constrained closed-loop supply chain with OEM remanufacturing

Abstract

Remanufacturing activities of original equipment manufacturers (OEMs), especially small- and medium-sized OEMs, are often constrained by their limited initial capital. Meanwhile, the available financing sources would be diverse and the OEMs would fund their manufacturing/remanufacturing through a portfolio of two or more financing sources. To analyze the interaction between cleaner remanufacturing production and financing portfolio strategy, a dyadic closed-loop supply chain consisting of one risk-averse supplier and one risk-neutral capital-constrained OEM is constructed in this paper. Further, three financing modes are considered, that is, partial trade credit with bank loan (PTC-with-BL), full trade credit with bank loan (FTC-with-BL) and pure bank loan (PBL). Some interesting results are found: (1) in the Case of PTC-with-BL mode, the greater the return rate and remanufacturing cost saving, the lower the proportion of OEM’s prepayments required by the supplier; (2) compared with the financing modes of FTC-with-BL and PBL, the PTC-with-BL mode will be more conducive to the production of cleaner remanufactured products when the profit margins of supplier’s production and OEM’s hybrid manufacturing/remanufacturing are large, and the degree of supplier’ risk-aversion is high; (3) under different parameter settings, the supplier, the OEM and the whole supply chain will have different choice preferences for the three financing modes: PTC-with-BL, FTC-with-BL and PBL.