JOINT FINANCING ARRANGEMENTS FOR E-COMMERCE SUPPLY CHAIN WITH CAPITAL CONSTRAINED ONLINE SUPPLIER

Abstract

This study investigates the value of platform loan to the e-commerce supply chain when combined with other financing schemes under market demand uncertainty. We assess the optimal interest rate for the platform and the optimal production quantity for the online supplier under three different scenarios: pure platform loan (PPL), supplier’s bank financing with platform loan (SB-with-PL) and platform’s prepayment with platform loan (PP-with-PL), respectively. It has been analytically proven that joint financing can foster more rational risk and revenue sharing mechanisms compared to the PPL approach. Moreover, PP-with-PL scheme yields a higher output level than SB-with-PL scheme when the supplier’s bank financing and the platform’s prepayment provide an equal capital input. After identifying the conditions under which joint financing arrangements are acceptable for both of the two parties, we examine the effects of different financing schemes on the performance of the platform, the supplier and the whole supply chain. Numerical examples illustrate that the dominance between SB-with-PL and PP-with-PL for the whole supply chain and the participants depends not only on the financing amount obtained from other channels but also on the pre-unit revenues of the supplier and the platform.