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Managing Supplier Financial Risk with Pre-shipment Finance Instruments

  • Lima ZhaoEmail author
  • Arnd Huchzermeier
Chapter
Part of the EURO Advanced Tutorials on Operational Research book series (EUROATOR)

Abstract

In this chapter, we present a stylized model for managing supplier financial distress risk by two pre-shipment finance instruments: advance payment discount (APD) and buyer-backed purchase order finance (BPOF). We analyze the mechanisms of APD and BPOF, respectively. Next, we characterize the equilibria between APD and BPOF in both single-financing and dual-financing schemes. Moreover, we show numerically the effects of demand variability and the retailer’s internal capital level on the financing equilibrium and supply chain efficiency. We conclude with a brief summary and directions for future research.

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Copyright information

© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Associate Professor of Supply Chain Management, Ningbo Supply Chain Innovation Institute ChinaMIT Global SCALE NetworkNingboChina
  2. 2.Chair of Production ManagementWHU-Otto Beisheim School of ManagementVallendarGermany

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