Operational decisions and financing strategies in a capital-constrained closed-loop supply chain

This paper aims to find operational decisions and financing strategies in a closed-loop supply chain (CLSC) consisting of a financially constrained manufacturer and a retailer. Based on a benchmark model without financing, three different financing strategies for the capital-constrained manufacturer, bank financing (BF), retailer credit financing (RCF), and hybrid financing (HF), are respectively incorporated and investigated. Analytical results show that: (a) Depending on the initial working capital /and the increased cost of financing from the bank, the manufacturer will change remanufacturing strategy from Partial remanufacturing to Complete remanufacturing for capital constrained CLSC when the relative unit cost of the remanufactured product is moderate; RCF strategy only revises and charges a higher wholesale price of new and remanufactured products; (b) For a financially constrained manufacturer in the CLSC, it holds the prerequisite to implement external financing and a higher financing rate to bank clearly cuts down the profits of the manufacturer and the channel but improves the retailer’s profit under certain conditions; RCF strategy always redistributes the channel profit compared with the non-capital-constrained CLSC; c) A feasible financing rate to the bank of the manufacturer and an appropriate interest rate threshold of the retailer are potentially confirmed.