Abstract
Inventory financing affects the risks of both for banks and supply chain companies. Traditionally, supply chain research focus more on material flow than financial. We construct a supply chain financing risk-information migration model (RMM). In this model, we discussed the preconditions to adopt inventory financing when the enterprises are facing cash constraints. And we simulated the whole operate of supply chain and bank behavior with Matlab. The simulation result shows if loan conditions are satisfied, the total risk value is reduced. Risk migration happens in the financing process. In this process, information-risk proportions are more reasonable.
Highlights
Modern corporate finance theory is founded on the proposition that financial capital is supplied to firms by investors who have an “expectation of return”, and that, Cavinato (1991) research show supply chain can reduce cost, improve quality and make lead time shorter [1], it can improve competence of the whole supply chain
It is essential to corporate supply chain research with finance theory
We observe that supply chain theory begins with “irrelevancy” pronouncements about a firm’s value being independent of its supply chain optimization
Summary
Modern corporate finance theory is founded on the proposition that financial capital is supplied to firms by investors who have an “expectation of return”, and that, Cavinato (1991) research show supply chain can reduce cost, improve quality and make lead time shorter [1], it can improve competence of the whole supply chain. Srinivasa Raghavan and Vinit Kumar Mishra (2009) consider a two-level supply chain with a single retailer and a manufacturer, where both the firms are facing financial constraints and cannot produce/order their optimal quantity [5]. A lender tries to perceive its exposure to default risk by looking into borrower’s accounts, due to lack of proper information, the buying or selling capacities of preceding or following stakeholders, as in manufacturer and its retailer of supply chain remain unknown. VaR is adopted to calculate risk value of manufacture and bank loan It is equal the maximum loss from the specific confidence level. One bank provides loans to both manufacture and retailer if they applied and passed evaluation of risk level. Account receivable of retailer After risk evaluation, lend available from bank to manufacture After analysis of market information, load applied from manufacture to bank Accounts payable of manufacture
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