Effect of the timing of managing capital flow and logistics on supply chain performance

The timing of managing capital flow and logistics within supply chains typically encompasses three scenarios: capital flow synchronizing with, lagging behind, and preceding logistics, which are commonly observed in practice. However, very few papers have addressed the research questions such as why these orders happen in supply chains and which scenario would be better for a supply chain. To fill this gap, we use an economic order quantity setting and take a game-theoretical approach to answer these questions for a two-echelon push supply chain consisting of a supplier and a retailer across the above three scenarios. Our study yields the following results. First, if the retailer’s unit opportunity gain is small and the trade credit period is large, the retailer prefers the scenario of capital flow synchronizing with logistics, and otherwise, the scenario of capital flow lagging behind logistics. Second, it is better for the supplier to make capital flow precede logistics if the supplier’s unit opportunity gain is relatively large, capital flow lag behind logistics if the supplier’s unit opportunity gain, opportunity cost, and the retailer’s unit stock-holding cost, opportunity gain are small, and the trade credit period is large, or the value of the supplier’s unit opportunity gain is relatively middle, and otherwise, capital flow synchronize with logistics. Last, the scenario that capital flow precedes logistics is better for the whole supply chain if the supplier’s unit opportunity gain is sufficiently large; otherwise, it is not the case.