Optimal decision in a green supply chain: Bank financing or supplier financing

The optimal procurement decision of a two-echelon green supply chain with options under capital constraints and financing credit support is studied. At the beginning of the order lead time, the retailer with capital constraints purchases fixed order quantity and options, and exercises all or part of the options during the sales period. We consider two types of credit financing methods: supplier financing and bank financing. At the same time, the non-financing situation is used as a benchmark model, where we find that there is a threshold for the retailer's working capital. That is, the retailer only purchases a fixed order when the working capital is less than the threshold. When working capital gradually increases, the retailer will reduce fixed order quantity and increase option order quantity, which shows that options are a risk hedging tool for the retailer. In addition, we find that the benefits of supply chain members are higher than those of the benchmark model regardless of supplier financing or bank financing, and cleaner production will bring more benefits to supply chain members. We find that the retailer is a free rider in the green supply chain. Given the corresponding parameters and the form of demand function, we can decide whether to choose supplier financing or bank financing. Finally, numerical examples are given. (C) 2020 Elsevier Ltd. All rights reserved.