Decentralized and centralized supply chains with trade credit option

The notion of a trade credit period is a common business practice, where a supplier allows a buyer a specified period to make a payment in full for a purchase made. The objective of this thesis is to explore the role of such a credit payment option in supply chain management. Towards this end, a two-echelon supply chain, consisting of a single supplier (e.g. manufacturer) and the cases of both a single and multiple buyers (e.g. retailers) is examined under decentralized (independent) and centralized (coordinated) decision making scenarios. The major emphasis of this research is limited to the case of a single product with price-sensitive deterministic, as well as stochastic market demand.The conditions under which a trade credit period should be offered and its appropriate length are determined from the supplier’s perspective under the decentralized case. Under the centralized decision scenario, the efficacy of a trade credit policy as a supply chain coordination mechanism is thoroughly analyzed and guidelines for pricing, production and delivery decisions are developed. The concepts developed in this study are illustrated via a number of numerical examples, in conjunction with thorough sensitivity analyses involving some selected problem parameters.The major contribution of this thesis is that we incorporate the pricing and inventory issues in supply chains with an endogenous credit payment period. This is the first study that examines the efficacy of trade credit option as a coordination mechanism. We propose a coordination mechanism that coordinates the supply chain, when a trade credit by itself is not sufficient to serve such a purpose, while preserving the benefits of a trade credit option. Also, this study is the first to examine the issues concerning trade credit under price sensitive stochastic demand. Another first for this work is the exploration of the implications of a trade credit policy in supply chains consisting of multiple competing retailers. The effects of the extent of competition and the market size on trade credit policy are evaluated. Our analyses lead to some important practical implications, to serve as managerial guidelines.Ph.D., Decision Sciences -- Drexel University, 201

Supply Chain

Traditionally supply chain management has meant factories, assembly lines, warehouses, transportation vehicles, and time sheets. Modern supply chain management is a highly complex, multidimensional problem set with virtually endless number of variables for optimization. An Internet enabled supply chain may have just-in-time delivery, precise inventory visibility, and up-to-the-minute distribution-tracking capabilities. Technology advances have enabled supply chains to become strategic weapons that can help avoid disasters, lower costs, and make money. From internal enterprise processes to external business transactions with suppliers, transporters, channels and end-users marks the wide range of challenges researchers have to handle. The aim of this book is at revealing and illustrating this diversity in terms of scientific and theoretical fundamentals, prevailing concepts as well as current practical applications

Improving supply chain profit through reverse factoring: A new multi-suppliers single-vendor joint economic lot size model

3siSupply chain finance has been gaining attention in theory and practice. A company’s financial position affects its performance and survivability in dynamic and volatile markets. Those that have weak financial performance are vulnerable when operating in environments that are uncertain and financially unstable. Companies adopt various solutions and techniques to manage, effectively and efficiently, the flow of money to and from its suppliers and buyers. Reverse factoring is an innovative technique in supply chain financing. This paper develops a joint economic lot size model where a vendor coordinates operational and financial decisions with its multiple suppliers through the establishment of a reverse factoring arrangement. The creditworthy vendor systematically informs a financial institution (e.g., bank) of payment obligations to selected suppliers, enabling the latter to borrow against the value of the relevant accounts receivable at low interest (borrowing) rates. The paper also presents a numerical example and a sensitivity analysis to illustrate the behavior of the model and to compare the economic and operational performance of a supply chain with and without a reverse factoring agreement. The results show that the establishment of a reverse factoring agreement within the supply chain improves the economic performance and impacts on the operational decisions.openopenMarchi B.; Zanoni S.; Jaber M.Y.Marchi, B.; Zanoni, S.; Jaber, M. Y

Sustainable Inventory Management Model for High-Volume Material with Limited Storage Space under Stochastic Demand and Supply

Inventory management and control has become an important management function, which is vital in ensuring the efficiency and profitability of a company’s operations. Hence, several research studies attempted to develop models to be used to minimise the quantities of excess inventory, in order to reduce their associated costs without compromising both operational efficiency and customers’ needs. The Economic Order Quantity (EOQ) model is one of the most used of these models; however, this model has a number of limiting assumptions, which led to the development of a number of extensions for this model to increase its applicability to the modern-day business environment. Therefore, in this research study, a sustainable inventory management model is developed based on the EOQ concept to optimise the ordering and storage of large-volume inventory, which deteriorates over time, with limited storage space, such as steel, under stochastic demand, supply and backorders. Two control systems were developed and tested in this research study in order to select the most robust system: an open-loop system, based on direct control through which five different time series for each stochastic variable were generated, before an attempt to optimise the average profit was conducted; and a closed-loop system, which uses a neural network, depicting the different business and economic conditions associated with the steel manufacturing industry, to generate the optimal control parameters for each week across the entire planning horizon. A sensitivity analysis proved that the closed-loop neural network control system was more accurate in depicting real-life business conditions, and more robust in optimising the inventory management process for a large-volume, deteriorating item. Moreover, due to its advantages over other techniques, a meta-heuristic Particle Swarm Optimisation (PSO) algorithm was used to solve this model. This model is implemented throughout the research in the case of a steel manufacturing factory under different operational and extreme economic scenarios. As a result of the case study, the developed model proved its robustness and accuracy in managing the inventory of such a unique industry

Beyond Paris: 11 innovations in aid effectiveness

The current framework for improving aid effectiveness, the 'Paris' agenda of harmonisation and alignment, has been found lacking. Alternatives are needed. This paper highlights some examples of recent innovations in the management and delivery of development aid. Drawing upon Barder (2009) and Howes (2011), the paper structures 11 innovations into three categories: improving the quality of the aid donor; improving the quality of the aid recipient; and improving how donors interact and the way aid is given. By examining these 11 innovations, the paper shows that aid agencies have the potential to adapt and evolve. The challenge for donors is to start selecting good ideas for implementation now and to never stop searching for new innovations to improve aid effectiveness.aid

Vendor-Buyer Coordination in Supply Chains

Collaboration between firms in order to coordinate supply chain operations can lead to both strategic and operational benefits. Many advanced forms of collaboration arrangements between firms exist with the aim to coordinate supply chain decisions and to reap these benefits. This dissertation contributes to the understanding of the conditions that are necessary for collaboration in such arrangements and the benefits that can be realized of such collaboration arrangements. This dissertation focuses on the vendor-buyer dyad in the supply chain. We identify and categorize collaboration arrangements that exist in practice, based on a review of the literature and combine this with formal analytical models in the literature. An important factor in the benefits of collaboration is the benefit of reduced costs of transport, by realization of economies of scale in the context of capacity-constrained trucks. As a contribution to the understanding of the dependence of transport costs on the volume transported, we demonstrate how transport tariffs for orders of less-than-a-truckload in size on a single link can be deduced from a basic model. The success of a collaboration arrangement depends on agreement about the distribution of decision authority and collaboration-benefits. We study a collaboration arrangement in which the vendor takes responsibility for managing the buyer's inventory and makes it economically attractive to the buyer by offering a financial incentive, dependent on the maximum level the buyer permits to be stocked. This dissertation demonstrates that this incentive alignment leads to considerable cost savings and near-optimal supply chain decisions

PRICING AND FINANCING DECISIONS WITH UNRELIABLE SUPPLIES

Ph.DDOCTOR OF PHILOSOPH

Maximising the value of supply chain finance

Supply Chain Finance (SCF) arrangements aim to add value by taking a cooperative approach to financing the supply chain. Interest in SCF has been increasing, and decision makers need a comprehensive view of possible applications and their potential. By means of theoretical and empirical exploration, we develop a conceptual framework that allows for positioning of SCF concepts and practices. The framework is based on a delineation of four archetypal SCF policies and the criteria that are relevant for adoption of each policy. The two main contributions of our framework are: (1) it explicitly considers operational motives as well as the financial motives that could prompt a firm to engage financial cooperation; and (2) it uses a discounted cash flow approach to illustrate the trade-offs that arise from different risks in SCF implementations. We use the framework to review policies that have been used in reverse factoring, an SCF practice that has recently become popular. Our study reveals implications for all the parties involved in an SCF implementation

THEORETICAL AND EMPIRICAL STRATEGIES FOR MANAGING IRRIGATION SUPPLIES RISK: THE CASE OF RIO MAYO IRRIGATION DISTRICT IN SONORA, MEXICO

This dissertation comprises theoretical and empirical models to manage watersupply risk in irrigated agriculture. While irrigation is by itself a strategy to regulate thesupply of water for farm use, water systems that depend on surface water sources are stillsubject to the random inflows that feed their reservoirs. Depending on the size of thereservoir, the demand for irrigation, and the seasonal distribution of inflows, wateravailability may decrease to levels that severely constraint agricultural production. Thisdissertation begins with a theoretical examination of on-farm cropping decisions underwater endowment risk. However, the analysis is extended to the use of a risk-sharinginnovation to transfer the water availability risk outside an irrigation district. Specifically,the design, use, and economic feasibility of an inflow-based derivative are studied for theRio Mayo irrigation district, located in Northwestern Mexico.On the theoretical front, the analysis consists of modeling the on-farm economicsof hedging against uncertain irrigation endowments. The basic model starts by analyzingthe role of crop diversification. As expected, the firm responds to higher degrees of risk,as measured by the variance in the supply of water, by allocating less land towards thewater-intensive crops. The underlying motivation in these strategies is the need to avoidthe relatively larger reductions in productivity sustained by water-intensive cropportfolios. However, crop diversification comes at the cost of reduced profits. As analterative to crop diversification, the model is modified to study the role of an institutionthat transfers water contingent on the states of nature. The extension shows that, undercertain conditions, enrolling in such a scheme produces the same profit as undercertainty.In the empirical component of the dissertation, the economics of an inflow-basedderivative are examined. The modeling strategy consists of simulating the economicenvironment and hydrological profile of the Adolfo Ruiz Cortinez Reservoir on the RioMayo irrigation district. Specifically, a stochastic dynamic simulation model is developedthat captures the intra and inter seasonal risk aspects associated with water risk and wateruse for irrigated agriculture. The results indicate that the inflow-based derivative is aviable instrument in the terms of affordability (i.e. premiums) and yield effective incomeprotection (i.e. risk reduction)