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Journal of Applied Mathematics
Volume 2014, Article ID 902739, 7 pages
http://dx.doi.org/10.1155/2014/902739
Research Article

The Model of Distributor Chain Financing Based on Buy Back Guarantee Contract

1Faculty of Applied Mathematics, Guangdong University of Technology, Guangzhou 510520, China
2School of Business Administration, South China University of Technology, Guangzhou 510641, China

Received 13 December 2013; Accepted 11 August 2014; Published 20 August 2014

Academic Editor: X. Zhang

Copyright © 2014 Jian-xin Chen and Jia-yin Chen. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper considers the strategy employed by a buy back guarantee contract with a capital-constrained distributor and a core enterprise. The distributor faces a nonnegative random demand, and the core enterprise applies buy back guarantee contract in order to interact with the capital-constrained distributor. Mathematical model is built to get the optimal ordering quantity of the distributor and the optimal wholesale price of the core enterprise. Then sensitivity analysis of optimal ordering quantity is obtained about the wholesale price, the initial funds, and the salvage of the product. On that basis, the comparison is made between two financing modes—trade credit contract and buy back guarantee contract. In the end, a numerical analysis is illustrated. The results show that the different financing modes bring the different expected profits to supply chain system with the different initial funds, finding that the financing modes, buy back guarantee contract discussed in the paper, can create more value for supply chain system than trade credit contract.