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Abstract: 

Advanced technology platforms ? such as eProcurment systems, automatic electronic payments, e-commerce platforms, RFID, and mobile devices ? have greatly increased the variety and flexibility of payment timing between supply chain stages, and this trend is increasing as innovations in the broader Fintech continue to emerge. Managing the payment timing between firms has become an important instrument within the general topic of supply chain finance. This paper develops a modeling framework and methodology to evaluate the impact of different payment timing arrangements in a serial supply chain. Under a class of payment timing contracts, we show how to express payment flows at each stage in terms of standard physical inventory metrics and the demand arrival process. We also show how to calculate the average inventory costs for each stage under given inventory policies and payment timing contracts. Applying this framework to the two-echelon base stock model, we prove that the cost of decentralization under standard wholesale price contracts is significantly driven by too much inventory at the supplier; it is not exclusively driven by too little inventory at the retailer as in the selling-to-the-newsvendor literature. On the other hand, there exists a wholesale price contract with partial consignment timing that can achieve the centralized inventory levels at both the supplier and the retailer.

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Anh Ninh

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