Third‐party logistics firm's technology investment and financing options in platform‐based supply chain with 4PL service

Abstract

AbstractIn practice, capital‐constrained third‐party logistics (3PL) firms usually obtain bank financing (BF) to invest in logistics technology to enhance the consumer shopping experience. The emergence of financial innovation has prompted the adoption of alternative financing modes by 3PLs, including e‐commerce platform financing (EPF) and fourth‐party logistics financing (4PF). To clarify the differences among the three financing modes at the operational management level, we develop a Stackelberg game model to capture the strategic interactions between the 3PL and creditors. We examine a platform‐based supply chain where a manufacturer sells products through an e‐commerce platform to consumers, with the logistics services for the supply chain provided by the 3PL and fourth‐party logistics (4PL) firms. The analysis results reveal that the equilibrium interest rates under EPF and 4PF share a similar pattern regarding the logistics service cost coefficient, the commission rate, and the 4PL service fee. The difference is that under EPF (4PF), the logistics service level increases in the commission rate (4PL service fee) but decreases under the other financing strategy. Furthermore, the 3PL is inclined to invest in logistics technology only when the fixed investment cost is low, and these financing modes are complementary rather than alternative. The 3PL and manufacturer can benefit from 4PF (BF) when the logistics service cost coefficient is large and the market size is small (large); otherwise, EPF can enhance their profits. We also find that when the opportunity costs of capital are homogeneous, both the 4PL and the platform are consistently willing to act as financiers themselves. However, when considering heterogeneity in the opportunity costs of capital, they may be reluctant to provide financing. Each financing mode may achieve Pareto improvements under specific conditions. Finally, we also analyze the impact of technology R&D risks and endogenous 4PL service fee, yielding some valuable insights.