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Wei Luo, Kevin Shang (2019)
Technical Note - Managing Inventory for Firms with Trade Credit and Deficit PenaltyOper. Res., 67
Robert Modansky, Jerome Massimino (2011)
Asset-Based Financing Basics: What CPAs Need to Know about Using Asset-Based Lending and Factoring as Alternatives to Traditional Bank FinancingJournal of accountancy, 212
This study considers a stochastic inventory management problem where a capital‐constrained firm can obtain additional working capital through inventory‐based financing (IBF) by pledging its inventory to obtain loans from a lender. We show that the firm's optimal inventory policy in each period may order new inventory up to a state‐dependent order‐up‐to level subject to the firm's capital and IBF loan constraints, or salvage existing inventory down to a state‐dependent salvage‐down‐to level. We further partially characterize the structures of the two state‐dependent levels in each period. Through analytical and numerical studies, we offer a number of new insights regarding the optimal inventory management for a capital‐constrained firm with access to inventory‐based financing. In particular, we find that when the firm anticipates a shortage of capital with which to meet high demands in a future period, it may strategically over‐stock its inventory in earlier periods in order to secure the necessary capital. Through extensive numerical studies, our study also demonstrates how some of the key parameters may affect the optimal inventory policy and the value of IBF.
Production and Operations Management – Wiley
Published: May 1, 2021
Keywords: ; ; ;
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