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research article

Benefits of working capital sharing in supply chains

Protopappa-Sieke, Margarita
•
Seifert, Ralf W.  
2017
Journal Of The Operational Research Society

Supply chain finance and working capital management are important avenues to reduce supply chain costs. Small suppliers may not have sufficient working capital to finance their operations and efficiently supply their customers. We develop a model that captures the fundamental aspects of financial and operational planning in a two-stage supply chain, with both strong and weak members. A strong member can negotiate for more favorable financing rates, more advantageous payment terms, and shorter lead times than a weaker member. We investigate two working capital allocation scenarios. In the dedicated working capital allocation scenario, the members of the supply chain each have their own working capital. In the joint working capital allocation scenario, the members of the supply chain have a joint pool of working capital. Our results demonstrate significant benefits when the members of the supply chain share the working capital. We also show that extending payment delays to a supplier upstream results in higher overall supply chain costs.

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Type
research article
DOI
10.1057/s41274-016-0009-2
Web of Science ID

WOS:000400494500005

Author(s)
Protopappa-Sieke, Margarita
•
Seifert, Ralf W.  
Date Issued

2017

Publisher

Palgrave Macmillan

Published in
Journal Of The Operational Research Society
Volume

68

Issue

5

Start page

521

End page

532

Subjects

financial supply chain management

•

supply chain finance

•

working capital management

•

payment delays

•

inventory management

Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
TOM  
Available on Infoscience
May 30, 2017
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/137897
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