On the Supply Chain Finance Role of 3PL s Procurement Service

Transcription

1 On the Supply Chain Finance Role of 3PL s Procurement Service Xiangfeng Chen School of Management, Fudan University A joint work with Gangshu(George) Cai and Jeannette Song 2014 International workshop on Supply Chain Management at Shanghai Maritime University

2 Role of 3PL firms Upstream (supplier) Product Information Funds/Capital Downstream (retailer) 3PL is widely ignored in the literature 2 /23

3 Traditional role of 3PL firms Product Upstream (supplier) Information Funds/Capital Downstream (retailer) Transportation 3PL firms Warehousing Distribution 3 /23

4 New role of 3PL firms Product Upstream (supplier) Information Funds/Capital Downstream (retailer) 3PL firm Transportation Warehousing Distribution Procurement and Financial Service 4 /23

5 60 day s credit term Delivering 3PL s procurement role in supply chain GE Ordering Retaielr1 Retailer2 Retailer3 Eternal Asia Deliverying on time 20 days collecting payment Retailer N 5 /23

6 Research questions How does the 3PL procurement service affect the supply chain performance? The manufacturer? The retailer? The 3PL? The impact of number of retailers? Does the 3PL leadership matter? How would firms capital opportunity costs affect the outcome? 6 /23

7 Literature review Limited literature on 3PL Chen and Cai (2011) : Joint logistics and financial service Schittlekat and Sorensen (2009): 3PL partner Balakrishnan et al. (2010): deliver fees The payment scheme Chen et al. (2011): payment scheme and inventory decision Song and Tong (2012): payment schemes on inventory in a multi-period supply chain model 7 /23

8 Agenda Introduction Literature Review Model Analysis Extensions Conclusion 8 /23

9 Model: Traditional 3PL (Case T) Manufacturer q 3PL firm w m w l wq m Retailer Q N wq l q min{ DQ, N } 9 /23 p min{ D, q} 1. The retailer pays the manufacturer when ordering 2. The 3PL firm ships the products

10 Model: 3PL Procurement (Case P) Manufacturer q wq m 3PL firm w m w l min{ DQ, N } Retailer ( w w ) q Q N l m p min{ D, q} q 1. The 3PL firm helps the retailer procure the products from the manufacturer 2. The retailer pays when products are delivered 10 /23

11 Model: Payment epochs o O R K S r g Case T : 1. Retailer pays Manufacturer at O 2. Retailer pays 3PL at R Case P: 1. 3PL collects all payment from the retailer at R 2. 3PL pays the order to the manufacturer at K 11 /23

12 Model: firm s payoff functions 12 /23

13 Model: The supply chain game Retailer s profit function Manufacturer s profit function 3PL firm s profit function 13 /23

14 Analysis: Main findings-ordering 1. The optimal order quantity is affected by the payment lead times. 2. If g o r, the optimal order quantity is higher in Case P than in Case T o 14 /23 O R K S r g

15 Analysis: Main findings-firms preferences /23 15

16 The Pareto zone 16 /23

17 Analysis: Main findings-retailers number /23 17

18 Analysis: Main findings-importance of 3PL Leadership Proposition 4 When the manufacturer is the Stackelberg leader, all firms have the same profits in Case P as in Case T The Pareto zone: g o r /23 18

19 Extensions: Different cash opportunity costs Scenario one: the 3PL firm as the Stackelberg leader 19 /23

20 Extensions: Different cash opportunity costs Scenario two: the manufacturer as the Stackelberg leader 20 /23

21 Extensions: Leadership Comparison 21 /23

22 Supply Chain Efficiency Comparison It is socially beneficial to support a 3PL leadership role in supply chain procurement service. 22 /23

23 Conclusion Case P emerges as a mutually beneficial solution to all firms as long as the manufacturer is willing to provide a sufficiently long but not too long grace period It is more likely for procurement service to occur if the capital opportunity cost is higher for the retailer than for the manufacturer. The order quantity in Case P increases slightly quicker than that in Case T such that Pareto zone concavely enlarges as the number of retailer grows It can be more socially beneficial to have 3PL leadership than the manufacturer leadership 23 /23

24 /23 Thank You!