Trade credit insurance in a capital-constrained

Transcript:Trade credit insurance in a capital-constrained:
Trade credit insurance in a capital-constrained supply chain (International Transactions in Operational Research,2020) Reporter: Zhuang Xiaohui Date: 2021.10.10 CONTENTS Introduction 2. Literature review 3. Model description 4. Model of an uninsured supply chain 4.1. Retailer’s decision 4.2. Manufacturer’s decision 4.3. Centralized supply chain 5. Model of an insured supply chain 5.1. Retailer’s decision 5.2. Manufacturer’s decision 5.3. Centralized supply chain 6. Comparison of insured and uninsured supply chains 6.1. Role of insurance without considering the insurer’s behavior 6.2. Role of insurance: considering the insurer’s decision 7. Extension: a model with two asymmetric retailers(omit) 7.1. Two retailers’ decisions 7.2. Manufacturer’s perspective 8. Numerical analysis 8.1. The effect of the capital-constrained retailer’s initial capital 8.2. The effect of the manufacturer’s loss aversion 8.3. The effect of the insurer’s decision 8.4. The effect of the demand substitution rate 9. Conclusions Introduction This paper examines the role of trade credit insurance in a capital-constrained supply chain with one loss-neutral retailer and one loss-averse manufacturer. They model the interplay between these supply chain participants as a Stackelberg game and analyze their operating and financing decisions. In one capital-constrained retailer case, they find that either the manufacturer’s high loss aversion level or the retailer’s low initial capital motivates the manufacturer to adopt insurance. Insurance drives more credit financing with more attractive financing terms (a lower wholesale price), which promotes the manufacturer to collect better product sales and performance. Although the retailer enjoys improved profit from insurance, its default risk increases. Manufacturer （ loss-averse ） Retailer （ loss-neutral ） trade credit Trade credit refers to a short-term delay in payments that a seller (manufacturer) offers to a customer (retailer) to procure products. Insurance capital-constrained well-capitalized Contributions Our research contributes to the literature in three respects. First, this study attempts to explore the impact of insurance on operating and financial decisions in a supply chain through mathematical analysis. It provides important managerial and policy instructions on firms’ operations management. Second, we focus on how insurance affects the revenue and the risk of different participants in a supply chain. It indicates that risk-sharing mechanism, as the core concept of supply chain finance, could be a significant reason behind the extensive use of trade credit insurance in practice. Third, we analyze how the competition between two capital-asymmetric retailers influences the role of insurance. By incorporating trade credit insurance into retailers’ competition, this study enriches the research of supply chain finance.