Abstract: 

Integrated logistics and financial services have been practiced bythird party logistics (3PL)firms for years; however, the literature has been silent on the value of 3PL firms as creditproviders in budget-constrained supply chains. This paper investigates an extended supplychain model with a supplier, a budget-constrained retailer, a bank,and a 3PL firm, in whichthe retailer has insufficient initial budget and may borrow or obtain trade credit from either abank (traditional role) or a 3PL firm (control role). Our analysis indicates that the control rolemodel yields higher profits not only for the 3PL firm but also for the supplier, the retailer, and the entire supply chain. In comparison with a supplier credit model where the supplier providesthe trade credit, the control role model yields a better performance for the supply chain as longas the 3PL firm’s marginal profit is greater than that of the supplier. We further demonstratethat, for all players, both the control role and supplier credit models can outperform the classicnewsvendor model without budget constraint.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3023124

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