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Improving Supply Chain Profit through Reverse Factoring: A New Multi-Suppliers Single-Vendor Joint Economic Lot Size Model

Author

Listed:
  • Beatrice Marchi

    (Department of Mechanical and Industrial Engineering, Università degli Studi di Brescia, via Branze 38, I-25123 Brescia, Italy)

  • Simone Zanoni

    (Department of Mechanical and Industrial Engineering, Università degli Studi di Brescia, via Branze 38, I-25123 Brescia, Italy)

  • Mohamad Y. Jaber

    (Department of Mechanical and Industrial Engineering, Ryerson University, Toronto, ON M5B 2K3, Canada)

Abstract

Supply 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.

Suggested Citation

  • Beatrice Marchi & Simone Zanoni & Mohamad Y. Jaber, 2020. "Improving Supply Chain Profit through Reverse Factoring: A New Multi-Suppliers Single-Vendor Joint Economic Lot Size Model," IJFS, MDPI, vol. 8(2), pages 1-16, April.
    • Handle: RePEc:gam:jijfss:v:8:y:2020:i:2:p:23-:d:343164
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    References listed on IDEAS

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    Cited by:

    1. Kajjoune, Oussama & Aouam, Tarik & Zouadi, Tarik & Dairi, Meriem, 2021. "Dynamic lot-sizing with short-term financing and external deposits for a capital-constrained manufacturer," International Journal of Production Economics, Elsevier, vol. 242(C).
    2. Hans-Martin Beyer & Bodo Herzog, 2021. "Supply Chain Finance: Cost–Benefit Differentials under Reverse Factoring with Extended Payment Terms," IJFS, MDPI, vol. 9(4), pages 1-17, October.
    3. Jena, Sarat Kumar & Padhi, Sidhartha S & Cheng, T.C.E., 2023. "Optimal selection of supply chain financing programmes for a financially distressed manufacturer," European Journal of Operational Research, Elsevier, vol. 306(1), pages 457-477.

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