Supply chain finance-based payment scheme strategies in a pull supply chain

Abstract

A pull supply chain can reduce unnecessary inventory and lower carbon emissions. However, suppliers' capital constraints in the pull supply chain hinder their production and may disrupt the entire supply chain, limiting participants' efforts in sustainability actions. To alleviate this situation and motivate upstream and downstream enterprises in the supply chain to reduce carbon emissions for sustainable development, many core companies or financial institutions have employed payment-term-based supply chain finance (SCF) mechanisms such as carbon trade financing, including advanced payment, delayed payment, and reverse factoring. In this study, we acquire the optimal decisions for the supplier and manufacturer under each model and investigate the impacts of different payment schemes on the performance of individuals and the entire supply chain. In addition to reducing carbon emissions to promote sustainability goals, these payment mechanisms are also profitable. By comparing SCF-based payment schemes with the classic bank at-once payment, we show that the optimal payment scheme depends on financing priority. Furthermore, SCF-based payment schemes enhance profit efficiency in response to increasing demand fluctuations. The findings of our study provide insights for supply chain participants to choose the best payment-term-based SCF programmes to optimise operations, enhance their profitability, and achieve sustainable development.