Abstract
The Integrated Logistics and Finance Service (ILFS), an innovative service developed by the alliance of Third Party Logistics (3PL) firm and financial institutions, offers finance and logistics solutions to optimise the availability of capital within a given budget-constrained supply chain. Comparing 3PL firm's Conventional Logistics Service (CLS), we inspect the value of ILFS for the budget-constrained supply chain. We show that under CLS the budget-constrained retailer could not apply for commercial loans successfully because of the asymmetric information between borrowers and lenders, while under ILFS the truth is opposite. We also show that a monopolistic finance market or competitive finance market under ILFS can create value for the budget-constrained supply chain. Furthermore, the competitive finance market under ILFS could decouple the operations and finance decisions of the budget-constrained retailer.
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