Abstract
This study investigates a budget-constrained retailer's optimal fi-nancing and portfolio order policies in a supply chain with option contracts. To this end, we develop two analytical models: a basic model with wholesale price contracts as the benchmark and a model with option contracts. Each model considers both the financing scenario and the no-financing scenario. Our analyses show that the retailer uses wholesale price contracts for procurement, instead of option contracts, when its budget is extremely tight. The retailer starts to use a combination of these two types of contracts when the budget constraint is relieved. As the budget increases, the retailer adjusts the procurement ratio through both types until it can implement the optimal ordering policy with an adequate budget. In addition, the condition for seeking external financing is determined by the retailer's initial budget, financing cost, and profit margin.
Original language | English |
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Pages (from-to) | 1105-1122 |
Number of pages | 18 |
Journal | Journal of Industrial and Management Optimization |
Volume | 14 |
Issue number | 3 |
DOIs | |
Publication status | Published - 1 Jul 2018 |
Keywords
- Budget constraint
- External financing
- Option contract
- Portfolio procurement policy
- Supply chain management
ASJC Scopus subject areas
- Business and International Management
- Strategy and Management
- Control and Optimization
- Applied Mathematics