Financing strategy of the capital-constrained supply chain under uncertainty: the impact of blockchain technology on the credit period

Abstract

Purpose

This paper explores the effectiveness of using blockchain technology to solve financial constraints faced by small- and medium-sized suppliers in a capital-constrained supply chain.

Design/methodology/approach

To characterize the impact of blockchain on credit period and enterprise credit level, the study formulates a newsvendor model to analyze a supply chain in which a financially constrained supplier sells products to a financially sound manufacturer, subject to uncertain demand. The study investigates three repayment methods: the benchmark case without blockchain and two blockchain-enabled cases with the hybrid repayment mode and single repayment mode (SRM), respectively. The study derives and compares the equilibria under each repayment method to characterize their impact.

Findings

When the bank interest rate is low and the carbon cap is also low, choosing to implement blockchain technology leads to higher profitability for the manufacturer than not utilizing it. Within the framework of blockchain technology, when comparing the two repayment models, the manufacturer exhibits a preference for SRM. Furthermore, under specific conditions of the bank interest rate, blockchain technology can effectively facilitate consensus among supply chain members in terms of channel selection.

Practical implications

The results derived in this paper provide novel managerial implications to the capital-constrained members in terms of pricing decisions and order quantity under demand uncertainty considering blockchain technology, which transfers the creditor's rights to the bank and shortens the collection time. In addition, blockchain technology enables efficient and intelligent collaborative development of supply chains, which can reduce carbon emissions during the transportation of goods.

Originality/value

Few studies incorporate blockchain technology into supply chain finance, and this paper considers the credit period and capital's time value for a capital-constrained supplier facing the adoption of blockchain technology within a stochastic demand environment.

Citation

An, S., Li, B., Wang, M. and Zheng, W. (2023), "Financing strategy of the capital-constrained supply chain under uncertainty: the impact of blockchain technology on the credit period", Industrial Management & Data Systems, Vol. 123 No. 10, pp. 2659-2680. https://doi.org/10.1108/IMDS-10-2022-0657