Strategic Provision of Trade Credit in a Dual-Channel Supply Chain

This paper focuses on a dual-channel supply chain composed of a capital-constraint bricks-and-mortar retailer and a manufacturer, where a manufacturer can sell products through traditional retail channel and direct online channel simultaneously. Supplementary pricing strategy and competitive pricing strategy are simulated in our model, and we find that the former one is the better choice for manufacture when the retailer suffers capital constraint. In our analysis, the capital constraint on retailer could mitigate the price competition between two channels, and it may be beneficial to the manufacturer under certain conditions. Our findings show that the manufacturer should provide trade credit to retailers strategically rather than provide it unconditionally. We present two trade-credit strategies (trade credit with positive interest rate and trade-credit with zero interest rate) and suggest manufacture choose appropriate trade-credit strategies according to the initial capital of retailer. To guide the manufacturer when and how to provide trade credit, we conduct several numerical simulations based on our results, and further plot out the feasible region for each trade credit strategy based on corresponding conditions.