Supply chain financemodels on application of reverse factoring in capital-constrained supply chains

Resumen

Reverse factoring is a financial instrument that large creditworthy firms use to facilitate low cost financing to their suppliers by confirming future payment obligations to financial intermediaries. In this thesis, we study the implications of reverse factoring on the operational and financial decisions taken by supply chain participants in the face of capital constraints. First, we study analytically the impact of reverse factoring on the inventory replenishment decisions of a self-financed supplier in a stochastic multiperiod model. We formulate the problem as a Markov decision process and we find that a working capital-dependent base-stock policy, which specifies the sell-up-to level of the outstanding invoices with regard to their time to maturity, is optimal. A number of numerical experiments shows that reverse factoring: (a) improves both the magnitude and robustness of the supplier¿s payoff; (b) has the potential to unlock a considerable portion of the supplier¿s working capital; and (c) is not very efficient when allied with payment terms extension. Second, we study the implications of reverse factoring to a cash-constrained supplier when, in addition to demand uncertainty, there is uncertainty in the availability of external financing. We derive the supplier¿s optimal inventory decision for a benchmark case of perfect financial flexibility and for three financing alternatives with different cost and risk profiles. Our analytical results show that underinvestment may occur when the supplier is not financially flexible. In addition, our numerical analysis suggests that underinvestment is exacerbated for a large range of parameter values due to supplier¿s preference for lower cost ¿but risky¿ debt over secure one. We find that reverse factoring can eliminate the supplier¿s underinvestment problem while still improving his payoff. Third, we approach reverse factoring through the buyer¿s lens. In the first part, we study the impact of extending payment terms on the buyer¿s operational and financial costs in a continuous-review inventory model, in which supply lead time depends on the financial state of the supplier. Our numerical analysis shows that arbitrary terms extension that ignores supplier¿s financial capacity may have an adverse effect on the buyer¿s costs. In the second part, we study the implications of reverse factoring in the context of capital investment. We show that in the presence of deadweight costs on external financing, reverse factoring can facilitate higher investment to the benefit of the integrated supply chain.