Dr.Gangshu Cai from Santa Clara University gave talks in CEEP

Author:Qingyu Zhao    Source:ceep    Date:2017-09-11

  On September 7,Dr.Gangshu Cai from Santa Clara University was invited to give a report entitled “Guarantor Financing in a Four-party Supply Chain with Leadership Influence”.

  Recent years have seen guarantor financing growing rapidly in developing countries where small firms do not have sufficient creditworthiness to secure bank loans by themselves. However, no paper has studied the efficacy of guarantor financing in a supply chain context. This paper investigates both manufacturer guarantor financing (MG) and 3PL (third-party logistics) guarantor financing (LG) in a four-party supply chain, featuring a manufacturer, a 3PL, a retailer, and a bank, in three different game settings: manufacturer Stackelberg leadership, 3PL  Stackelberg leadership, and Nash game. Comparing MG to LG in each of the three game settings reveals that there exists a guarantor-follower advantage in which the whole supply chain can benefit from letting the Stackelberg follower be the guarantor. However, the follower’s preference of either MG or LG depends on the leader’s economies of scale in operational cost. While under Nash game, there is no difference between manufacturer and 3PL guarantor financing for the retailer and the supply chain, and both upstream firms prefer the other to be the guarantor. Furthermore, from the perspective of supply chain leadership, we find that the supply chain with longer hierarchy but with a leader can be more efficient with a gloomy outlook of the expected margin return of providing guarantor financing. Moreover, their analysis indicates that, if the upstream firms’ economies of scale are substantial, all firms still prefer guarantor financing even if the traditional bank financing is viable.