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The Model of Distributor Chain Financing Based on Buy Back Guarantee Contract

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  • Jian-xin Chen
  • Jia-yin Chen

Abstract

This paper considers the strategy employed by a buy back guarantee contract with a capital‐constrained distributor and a core enterprise. The distributor faces a nonnegative random demand, and the core enterprise applies buy back guarantee contract in order to interact with the capital‐constrained distributor. Mathematical model is built to get the optimal ordering quantity of the distributor and the optimal wholesale price of the core enterprise. Then sensitivity analysis of optimal ordering quantity is obtained about the wholesale price, the initial funds, and the salvage of the product. On that basis, the comparison is made between two financing modes—trade credit contract and buy back guarantee contract. In the end, a numerical analysis is illustrated. The results show that the different financing modes bring the different expected profits to supply chain system with the different initial funds, finding that the financing modes, buy back guarantee contract discussed in the paper, can create more value for supply chain system than trade credit contract.

Suggested Citation

  • Jian-xin Chen & Jia-yin Chen, 2014. "The Model of Distributor Chain Financing Based on Buy Back Guarantee Contract," Journal of Applied Mathematics, John Wiley & Sons, vol. 2014(1).
    • Handle: RePEc:wly:jnljam:v:2014:y:2014:i:1:n:902739
    DOI: 10.1155/2014/902739
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    References listed on IDEAS

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    1. Lai, Guoming & Debo, Laurens G. & Sycara, Katia, 2009. "Sharing inventory risk in supply chain: The implication of financial constraint," Omega, Elsevier, vol. 37(4), pages 811-825, August.
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    1. Lingling Xu & Wenhui Zhang & Tingting Tian, 2025. "Research on Agricultural Supply Chain Coordination Considering Financial Constraints Under Blockchain Technology," SAGE Open, , vol. 15(2), pages 21582440251, June.

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