Sự vận hành của chuỗi cung ứng theo hướng trách nhiệm xã hội với tín dụng thương mại và hợp đồng chia sẻ doanh thu

Nội dung text: Sự vận hành của chuỗi cung ứng theo hướng trách nhiệm xã hội với tín dụng thương mại và hợp đồng chia sẻ doanh thu

1. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 THE PERFORMANCE OF SUPPLY CHAIN CSR UNDER TRADE CREDIT AND REVENUE SHARING CONTRACTS SỰ VẬN HÀNH C ỦA CHU ỖI CUNG ỨNG THEO H ƯỚNG TRÁCH NHI ỆM XÃ H ỘI VỚI TÍN D ỤNG TH ƯƠ NG M ẠI VÀ H ỢP ĐỒNG CHIA SẺ DOANH THU Dinh Anh Phan, Thi Le Hoa Vo, Anh Ngoc Lai Université de Rennes, France Email: dinhanhdhkt@gmail.com anh-ngoc-lai@univ-rennes1.fr Abstract The growing of large retailers has altered the traditional structure of the supply chain. In this paper, we consider four kinds of strategies for a two-echelon supply chain where a capital-constrained retailer has the power to dictate the wholesale price and the supplier invests in corporate social responsibility (CSR) activities to increase the market demand. The four strategies are wholesale price contract with bank financing (WP-BF), wholesale price contract with trade credit (WP-TC), revenue sharing contract with bank financing (RV-BF), and revenue sharing contract with trade credit (RV-TC). In the first two strategies, we quantitatively analyze the impact of the CSR effort cost parameter on the optimal wholesale price and the overall performance of the supply chain. In the last two strategies, we establish a retailer-led revenue-sharing contract with bank financing and with trade credit, respectively. By comparing the equilibrium results under the four strategies, we find that: (1) WP-TC strategy performs better than WP-BF strategy for all supply chain partners. (2) RV-TC strategy can improve the CSR level and the overall profitability of the supply chain, but the dominant retailer is not benefit under such a strategy. Keywords : Supply chain, corporate social responsibility, revenue sharing contract, trade credit. Tóm t ắt Sự gia t ăng c ủa nh ững nhà bán l ẻ quy ền l ực đã làm thay đổi c ấu trúc truy ền th ống c ủa chu ỗi cung ứng. Trong bài vi ết này, chúng tôi xem xét b ốn chi ến l ược đối v ới m ột chu ỗi cung ứng g ồm nhà bán l ẻ hạn ch ế về lượng vốn ti ền m ặt nh ưng có kh ả năng áp đặt giá mua đến nhà cung c ấp, và nhà cung c ấp có th ể th ực hi ện trách nhi ệm xã h ội trong ho ạt động s ản xu ất để tăng c ầu th ị tr ường. B ốn chi ến l ược chúng tôi xem xét l ần l ượt là h ợp đồng bán buôn k ết h ợp v ới s ự tài tr ợ vốn c ủa ngân hàng, h ợp đồng bán buôn k ết h ợp v ới tín d ụng th ươ ng m ại, hợp đồng chia sẻ doanh thu k ết h ợp v ới s ự tài tr ợ vốn c ủa ngân hàng, và h ợp đồng chia sẻ doanh thu k ết h ợp v ới tín d ụng th ươ ng m ại. V ới hai chi ến l ược đầu, chúng tôi phân tích tác động c ủa chi phí th ực hi ện trách nhi ệm xã h ội đến vi ệc xác định m ức giá bán buôn và s ự vận hành c ủa chu ỗi cung ứng. V ới hai chi ến l ược cu ối, chúng tôi k ết h ợp vi ệc s ử dụng h ợp đồng chia sẻ doanh thu v ới s ự tài tr ợ vốn t ừ ngân hàng ho ặc v ới tín d ụng th ươ ng m ại. K ết qu ả so sánh s ự vận hành c ủa chu ỗi cung ứng theo b ốn chi ến l ược trên cho th ấy: (1) tín d ụng th ươ ng m ại giúp c ải thi ện lợi nhu ận c ủa t ất c ả các thành viên chu ỗi so v ới khi áp d ụng tài tr ợ vốn t ừ ngân hàng, và (2) s ự kết h ợp gi ữa h ợp đồng chia sẻ doanh thu v ới tín d ụng th ươ ng m ại giúp c ải thi ện vi ệc đầu từ vào trách nhi ệm xã h ội và nâng cao l ợi nhu ận c ủa nhà cung c ấp, tuy nhiên, nhà bán l ẻ không được h ưởng l ợi t ừ hợp đồng này. Từ khóa: Chu ỗi cung ứng, trách nhi ệm xã h ội, h ợp đồng chia sẻ doanh thu, tín d ụng th ươ ng m ại. 1. Introduction In today's business environment, suppliers are facing increasing pressure in their business operations. The mounting pressures from consumers, governments, NGOs and environmental groups have pushed the suppliers to make their business more socially responsible by investing in corporate social responsibility (CSR) activities. Suppliers try to implement CSR into their business also need to incur substantial costs. In a recent report 1, Financial Times showed that the Fortune 500 companies have spent more than $15 billion on various forms of CSR, which include: donating free drugs, giving 1 438
2. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 free software, investing in educational programs in developing countries or creating a more productive work environment for various minority groups. Fortunately, the consumers take firms' CSR activities into consideration when making purchase decisions and they are now willing to pay higher prices for the firms' products and services with CSR attributes. According to the results of a survey in 2016 by Nielsen 2, 66% of survey respondents (up from 55% in 2015 and 50% in 2014) are willing to pay more for sustainable products which are committed towards positive social efforts. However, even as CSR investment could increase the consumer demand for supplier’s products, the supplier’s wholesale prices do not raise high enough to compensate their investment costs. In some industries, the suppliers are increasingly facing with powerful buyers. Many retailers such as Wal-Mart, Tesco, and Home Depot are gaining a stronger position in negotiation with suppliers. It is frequently observed in practice that the large retailers have used their power to buy products at the lowest possible cost from the suppliers (Schiller and Zellner, 1992) or to get favorable wholesale terms via aggressive negotiating tactics (Facenda, 2004; Munson and Rosenblatt, 1999). In some cases, the suppliers are not even able to negotiate with the retailers in determining the wholesale price terms (Useem, 2003). In the face of persistent downward price pressure, the suppliers respond by cutting wages, reducing investments in working conditions and protecting the environment. For example, Make Fruit Fair (2015) reported that “the pressures from the market and originating from retailers have set up an economic environment in which the banana producers are bound to face strong competition and difficulties; workers and small farmers retain the smallest share of value and are likely, as the weakest links in the chain and suffer from serious social and environmental impacts” 3. Although some large retailers such as Ikea, Inditex and Targe have CSR policies or codes of conduct that relate to working conditions and workers’ rights, and some also have codes of conduct relating to procurement. It is apparent that retailers’ persistent downward price pressure on their upstream suppliers has been undermining their efforts to boost sustainability of their supply chains, and this in turn leads to supply chains that are not sustainable. In this context, some researchers have applied a revenue-sharing contract to provide incentives for suppliers to invest more in CSR (Panda et al., 2014; Hsueh, 2014; Song and Gao, 2018). In a revenue sharing contract, the supplier charges the retailer a much lower wholesale price in exchange for a percentage of the retailer's revenue. It was shown in existing studies that the revenue sharing contract not only enhanced CSR performance level but also improved the profitability of the entire supply chain under some circumstances (Song and Gao, 2018, Raj et al., 2018). However, it has also been assumed that all of the supply chain members have infinite budgets in these studies. Real-life situations show that supply chain members face capital constraints in their operational decisions (i.e., order, production and CSR investment). This is especially true for small and medium firms in developing countries that there hasn’t had an advanced financial market. Even in developed countries with financial markets available, some large retailers or companies, such as Wal-Mart, Home Depot, and Target also manage short-term supplier transactions as if they were limited in capital by maintaining a very small cash ratio (Kouvelis and Zhao, 2017). When the retailer is lack of funds to pay the suppliers, it might make sense to consider either bank loans or trade credit to address these constraints. Namely, the retailer can borrow from the bank to pay the supplier for entire order or adopts trade credit without any payments until the products are sold. By taking all above factors into consideration, this paper tries to apply the revenue sharing contract to the supply chain CSR with retailers who face capital constraints. The aim is to explore how to combine and effectively utilize financing sources with supply chain contracts to incentive the supplier invest in CSR activities while improving the performance of whole supply chain. For this aim, we consider a supply chain with a capital- constrained retailer and an upstream supplier. To mitigate capital constraints, the retailer can use either bank financing or trade credit financing. We combine either wholesale price contract or a revenue sharing contract with one of these two financing strategies. Specially, we investigate the supply chain performance under four strategies: wholesale price contract with bank financing (WP-BF), wholesale 2 3 439
3. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 price contract with trade credit (WP-TC), revenue sharing contract with bank financing (RV-BF), and revenue sharing contract with trade credit (RV-TC). Under WP-BF and WP-TC strategies, the supplier and the retailer play a Stackelberg game. In most previous studies, the supplier is assumed to behave as a Stackelberg leader in determining the wholesale price. However, with the rise of ‘big-box’ retailers as we have mentioned above, our work focuses on the supply chain with a dominant retailer who has the power to dictate the wholesale price. Under RV-BF and RV-TC strategies, we establish a retailer- led revenue sharing to represent the situation that the revenue sharing contract is determined by the retailer while the supplier incurs the whole CSR investment costs and can't participate in making the contract. The sequences of moves under a revenue sharing contract with bank financing and with trade credit are demonstrated in Figure 1 and 2, respectively. Then we investigate the performance of the supply chain under the four strategies and find out how the CSR investment cost and the consumer sensitivity to CSR affect the retailer’s optimal wholesale price. In addition, we compare the results of the four strategies to evaluate how revenue sharing contract affects the supplier’s CSR effort and the profit of supply chain. Retailer Borrows The demand is Repays loan from bank loan Determines realized and Makes decision bank to order Retailer transfers or goes on the Revenue make full quantity revenue share to bankruptcy payment sharing ratio the supplier Enters Determines the Delivers Starts into a RV CSR level and the production agreement sets the products wholesale price Supplier Fig. 1. Sequence of events under RV-BF strategy . Retailer The demand is Receives Pays the Determines realized and Makes decision products supplier or order Retailer transfers on the Revenue without goes quantity revenue share to payment bankruptcy sharing ratio the supplier Enters Determines the Delivers Starts into a RV CSR level and the production agreement sets the products wholesale price Supplier Fig. 2. Sequence of events under RV-TC strategy . 2. Problem description and assumptions Supply chain structure. We consider a two-echelon supply chain with an upstream supplier (referred to as “he”) that produces a finished product and sells it in the final market through a downstream retailer (referred to as “she”) over a single selling season. At the beginning of selling period, the supplier produces the retailer’s order quantity at a unit production cost c (0<c<1) . The 440
4. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 retailer sells the product to consumers at a price p which is being assumed exogenous and is known to all (normalized to 1 for convenience of presentation). All unmet demand is lost and the salvage value of leftover is zero. The supplier invests in Corporate Social Responsibility (CSR) activities to improve consumer perception and increase market demand. The upfront cost of CSR investment is borne by the supplier alone. We further assume that the CSR investment cost is nonlinearly increasing in CSR effort level, θ, and it is represented by κθ where κ > 0 is CSR investment cost parameter. Assumption of cost nonlinearity represents the diminishing rate of returns for CSR related activities. Market demand. Referring to Hsueh (2014), we assume that the CSR performance would increase the expected consumers’ demand. Therefore, the actual market demand, changes with the supplier's CSR effort level and has the following form: θ, where X denotes the market = + demand during sale period without CSR investment, θ is CSR effort level, and the parameter a indicates consumer sensitivity to CSR level. We further assume that X is a nonnegative random variable and follows a Uniform distribution in the range [0, A] with A>0. In Table 1, we summarize the notations for ease of reference. Supply chain collaboration and financing strategies. This paper is based on the perspective of the retailer, which is the Focal companies collaborate with suppliers on CSR initiatives. Therefore, as the SC leadership, the retailer first decides on whether to collaborate with the supplier to enter into a revenue-sharing contract to boost sustainability of their supply chains and the supplier then decides on its CSR effort level after observing the retailer's policy. Under a revenue sharing contract, the retailers keeps a fraction φ∈(0.1) of the revenue for herself and returns the rest 1 − φ to the supplier. In the event that the firms do not find it optimal to enter into a sharing contract, the retailer chooses a wholesale price contract or not trade with the supplier. Since the retailer’s initial capital is insufficient to support the desired operations (without loss of generality, we normalized it to zero only for brevity of exposition reasons), she needs to borrow some loans from the bank or ask for trade credit from the supplier. Bank loans and trade credit are different means of financing and can be applied with any type of supply chain contracts. Therefore, we consider these two financing strategies and then examine different supply chain strategies that include wholesale price contract with bank financing (WP-BF), wholesale price contract with trade credit (WP-TC), revenue sharing contract with bank financing (RV-BF), and revenue sharing contract with trade credit (RV-TC). When the supply chain members borrow some loans from a bank, we follow Kouvelis and Zhao (2018) by assuming that the bank is not a strategic player, and is in a perfectly competitive financial market. It means that the expected profit from providing a loan should be equal to the funds invested in the capital market at the risk-free interest rate. It is common in a capital market with a fairly priced loan. Furthermore, referring to Jin and al. (2018), we also assume that both the supplier and the retailer are limited-liability. That is, if they cannot repay their obligations debt, they will be forced into bankruptcy and will repay the entire realized revenue. In the next Section, we investigate the supply chain performance under these four strategies. Table 1: Notations used. Notation Explanation Notatio Explanation s ns p Unit retail price (normalized qi Retailer’s order quantity under strategy i to 1) wi Supplier’s wholesale price i ( = 0 , Index for WP-BF, WP-TC , RV-BF and RV-TC under strategy i 1 , 2 , 3 strategies, respectively ) θ Supplier's CSR effort level ∗ ∗ θ∗ The optimal decisions in the equilibrium under ( , , ) strategy i φ Revenue sharing ratio π Supplier's profit function under strategy i c Unit production cost π Retailer's profit function under strategy i 441
5. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 X Demand during sale period π∗ Supplier's profit in the equilibrium under without CSR investment strategy i κ CSR investment cost π∗ Retailer's profit in the equilibrium under parameter strategy i Π∗ a Supplier's CSR effort impact Whole supply chain’s profit in the equilibrium on demand (unit) under strategy i.e., Π∗ π∗ π∗ = + ri Bank’s interest rate under T Retailer’s selling time strategy i 3. Analysis of strategies 3.1. Wholesale price contract with bank financing (WP-BF) Under WP-BF strategy, the supplier decides on CSR effort level and charges the retailer a wholesale price w 0 per unit purchased satisfying downstream retailer’s maximum requirement imposed on w 0. Subsequently, the retailer determines an order quantity, q 0, and borrows dollars from a bank with an interest rate r 0 to pay the supplier for entire order. At the end of selling period, the demand is realized, the retailer harvests revenue and pays the bank to the extent () = , possible. The expected repayment of the retailer to the lending bank is . Its zero-profit (), condition is . Here, represents the retailer’s obligation to the bank (), = = under WP-BF strategy . Following the backward induction, we begin with the retailer’s problem, which can be written as follows: π , subject to . Based on the = () − (), = retailer’s best response, the optimization problem for the supplier under WP-BF strategy can be formulated as follows: θ π κθ, subject to ≤ .Next in Proposition 1, we state , = ( − ) − the equilibrium under WP-BF strategy for the case when the firm’s demand is uniform Proposition 1: When the demand follows Uniform [0, A], and the dominant retailer imposes a maximum level requirement on the wholesale price, let , the equilibrium results = under WP-BF strategy are as follows: (1) If ≥ then there exists a threshold level on the CSR investment cost parameter , 1 ̅ = such that: (a) As κthen the wholesale price charged by the supplier and the level of CSR effort invested in > equilibrium are { w0,θ}={} and the equilibrium order quantity and firm-level profits are (); = π π () () (b) As κ then the wholesale price charged by the supplier { , } = { , ( ) } < and the level of CSR effort invested in equilibrium are { w0,θ}={ } and the equilibrium order 1, quantity and firm-level profits are (); π π () . = { , } = { , 0} (2) If , then the wholesale price charged by the supplier and the level of CSR effort < , 1 invested in equilibrium are { w0,θ}={}, the equilibrium order quantity is (); and = − + firm-level profits are: π π ()( ()()) ()( ()()) By Proposition 1, the maximum requirement { , } = { , } imposed on wholesale price under WP-BF strategy, , plays a decisive role in the supplier’s optimal w wholesale price. When is relatively high (i.e., ≥ ), the supplier charges a wholesale price , 1 that smaller than the maximum requirement enforced by the retailer. On the other hand, for considerably low values of (i.e.,), the maximum requirement becomes binding and the supplier’s w wholesale price is determined exclusively by the retailer. Since the threshold is decreasing in supplier's CSR investment cost parameter, higher values of κ will make the condition < , 1 442
6. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 harder to satisfy. Therefore, this will not provide room to the supplier to maximize the profit by charging a higher wholesale price than the level enforced by the retailer. Next, we also illustrate our insights from numerical example through Fig. 3. As displayed in Fig. 3, as the CSR investment cost parameter is low (i.e., ), the supplier's profit increases with = 0.1 w0. In this case if the retailer has no control over the wholesale price, the supplier chooses a value of w0 approaching one to attain the highest profit. As a consequence, the retailer’s price control is only effective when the retailer forces suppliers to supply goods at a price less than one. However, as the CSR investment cost parameter is high (i.e ., ), the supplier's profit is concave with respect to w . = 0.3 0 Therefore, the supplier should raise the value of w0 approach 0.66 to attract the highest profit. In this case, the retailer’s price control policy only affects the supplier if the retailer requires the supplier to supply goods at a price lower than 0.66. Fig. 3. Impact of wholesale price, w 0, on the supplier’s profit under WP-BF strategy. Having characterized the equilibrium supply chain decisions and profits under WP-BF strategy, the following Proposition 2 examines how these values vary with the maximum requirement. Proposition 2. Given , the following result hold Proposition 2 shows that when the maximum requirement is significantly low, it reduces the supplier’s CSR investments. Therefore, a dominant retailer should increase the level of requirement on wholesale price to incentive the supplier invest more in CSR effort. An increase in wholesale price not only encourages the supplier to invest more in CSR activities but also increase the supplier’s profit. In contrast, the profit of retailer will decrease as wholesale price increase (see Fig. 4 for the case κ=0.3). However, in the case that the CSR investment cost parameter is low, the retailer can increase the wholesale price approach a threshold (i.e., ) to attract the highest profit (see Fig. 4 for the case = 0.46 κ=0.1). This result indicates that when faced with a dominant retailer who dictates wholesale terms, the suppliers can obtain a positive profit if they perform the CSR activities with low investment cost parameter, meaning that CSR is an advantage for suppliers to increase their position in negotiation with a dominant retailer. 443
7. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 Fig. 4. Impact of wholesale price w 0 on the retailer’s profit under WP-BF strategy 3.2. Wholesale price contract with trade credit (WP-TC) Under WP-TC strategy, the supplier determines the CSR level and sets a postponed wholesale price w 1 satisfying downstream retailer’s maximum requirement imposed on w1. Subsequently, the retailer orders a quantity, q 1, without any of payments. Upon receiving the order request, the supplier starts production, and delivers the products to the retailer. At the end of selling period, the demand is realized; the retailer yields revenue and pays to the supplier. () = , (), Accordingly, retailer’s problem can be written as: π and the optimization = () − problem for the supplier can be formulated as follows: θ π κ , subject to ≤ . Again, following the backward induction, , = (), − − we characterize the optimal decisions when the demand follows a Uniform distribution in Proposition 3. Proposition 3: If the demand follows Uniform [0, A], the equilibrium results under WP-TC strategy are as follows: (1) When the retailer has no control on the w 1, then the postponed wholesale price charged by the supplier and the level of CSR invested in equilibrium are {w1,θ}={ ()} and the equilibrium 1, order quantity and firm-level profits are (()); = π π ( ( )()) , respectively . { , } = {− () , 0} (2) When the retailer dictates the postponed wholesale price to the supplier. Let is the maximum w level requirement imposed on the w 1, the wholesale price charged by the supplier and the level of CSR invested in equilibrium are {w1,θ}={}; the equilibrium order quantity is ( ()()); and = () firm-level profits π π { , } = ( ( ()())(()())) ()()( ()()) Proposition 3 shows that the { , − } ( () ) ( () ) suppliers' profits under WP-TC strategy always increase with the postponed wholesale price. Therefore, if the retailer has no power in control of supplier’s wholesale price, the supplier should raise the value of w1 approach one to attract the highest profit. In this case, the retailer obtains a zero profit. In contrast, when the retailer dictates the postponed wholesale price, the retailer sets a postponed wholesale price that is lower than one to get a positive profit, and the supplier’s postponed wholesale price is determined exclusively by the retailer. In Proposition 4, we investigate the retailer’s optimal decision on postponed wholesale price. 444
8. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 Proposition 4. Given , let , ( ) ; = − 1 + > ̂ = − ̿ ≝ − + 4 + ( + 4 + , and 12 )#1 + ( + 4 + 12 )#1 + (2 + 4 )#1 + 2 #1 &,2 ≝ − − 4 + 4 + ( − + 8 − 6 + 12)#1 + (2 + 10 + 12)#1 + (2 + . 2 + 4 )#1 &,3 The following result hold: (a) π is always increasing in , π only if and > 0 > ̿ wholesale prices that maximize retailer’s profit is ∗ . = (c) As κ and then π is concave in ∈ and the optimal postponed wholesale prices is ̂ cannot offer trade credit at any level of wholesale price. Furthermore, as the postponed wholesale price is higher than a certain threshold , the supplier has incentive to trade with the retailer. By part (b) and (c) of Proposition 4, the optimal value of w1 that maximizes retailer’s profit depends both on the production cost and CSR investment cost parameter. As the CSR cost is very high or as the CSR cost is low but the production cost is high, the retailer decides a wholesale price at the lowest value that just gives the supplier a minimum profit. (i.e., zero). Otherwise, as both CSR cost and production cost are low; the retailer increases the wholesale price to get more profit and leaves the supplier a positive profit. The above analysis also reveal that the conditions for which the supplier yields a positive profit by providing trade credit are even more difficult when not providing trade credit. This raises a question about the supplier's willingness to provide a trade credit to a dominant retailer. For a more graphical look of Proposition 4, we provide an example with Fig. 5. As displayed in Fig. 5 (a), as the CSR investment cost parameter is high (i.e., κ=0.5) the retailer’s profit decreases in w1 whereas the supplier’s profit increases in w1. The supplier earns a positive profit when w 1 is higher than 0.33. Therefore, a dominant retailer should reduce w1 approach to 0.33 to attract the highest profit. As both the production cost and the CSR investment cost parameter are low, Fig. 5 (b) shows that the retailer’s profit is concave in w1 while the supplier’s profit increases in w1. Therefore, the retailer increases the value of w1 to approach 0.29 to attract the highest profit. In this case, the profits of retailer and the supplier are 15.01 and 5.02 respectively. (a) (b) Fig. 5. Impact of postponed wholesale price, w 1, on the SC member’s profit under WP-TC strategy 445
9. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 3.3. Revenue sharing contract with bank financing (RV-BF) We used Figure 1 to describe the timeline, player, and decisions under RV-BF strategy. In the initial stage, the retailer and the supplier establish a revenue-sharing contract which stipulates that for each unit of any product sold, the retailer keeps a fraction φ∈(0,1) of the revenue for herself and returns the rest 1 − φ to the supplier. In stage 2, knowing the share of revenues she would receive from the retailer, the supplier determines the CSR effort level and sets a wholesale price w2. Subsequently, the retailer announces an order quantity, q2, and the supplier produces the order then delivers it to the retailer. The retailer borrows dollars from a bank with an interest rate r2 to pay the supplier for the entire order. At the end of the period, the demand is realized, the retailer obtains revenue, she first shares φ with the supplier and then pays the rest to the bank to the extent possible. Thus her (1 − )() expected repayment to the lending bank is φ . Its zero-profit condition is φ (), (), = . Here, represents the retailer’s obligation to the bank under RV-BF strategy. Under = this setting, in determining the optimal decisions of the firms, we model the decision-making problems of the two SC members using three-stage game as follow: in stage 1: the retailer decides the sharing ratio, in stage 2: the supplier decides on the CSR level and the wholesale price, in last stage: the retailer determines the order quantity. Again, we use backward induction method to solve this sequential move game. We begin by characterizing the optimal ordering decisions of the retailer. For a given { φ,w 2,θ), the retailer’s problem is π φ . S.t. φ . Based on = () − (), = the retailer’s best response, the optimization problem for the supplier under RV-BF strategy can be formulated as follows: θ π φ κθ. Next, we summarize the optimal , = (1 − )() + ( − ) − decisions under RV-BF strategy in Proposition 5. Proposition 5. If the demand follows Uniform [0, A], given 0 κ*, the CSR effort level decreases with sharing ratio, where ∗ . = From Proposition 6 (a), the supplier sets a higher wholesale price as the revenue sharing ratio increases, whereas, the retailer’s order quantity decreases with the increase in the sharing ratio as shown in Proposition 6 (b). The explanation here is that as the retailer retains a larger share of the revenues, the supplier would need to push prices up to take the chance of gaining higher profits. As a result of the increase in the price, the retailer responds by reducing the order quantity. Proposition 6 (a) also reveals that the wholesale price contract without controlling price from the retailer will generate the lowest product for the SC but the same is not true for the CSR effort. We find in Proposition 6 (c) that for a high value of investment cost parameter, i.e., κ>κ*, an increase in sharing ratio leads to a decrease in the CSR level. Also, in case the investment cost parameter is low, with increase in the 446
10. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 sharing ratio, the CSR level increases. Another expression of Proposition 6 (c) is that as the sharing ratio, φ, increases, the CSR level first decreases with φ and then increases with φ when φ passes a certain threshold, i.e., (see Fig. 6 for the case κ=0.2). Hence, we find a threshold policy on the = CSR level in terms of sharing ratio. However, for the case the value of κ is high, i.e., , the CSR > level is always decreasing in φ, and we didn’t observe a threshold policy on the CSR level (see Fig. 6 for the case κ=0.5 ). The intuition is that receiving less revenue does not encourage the supplier to increase the investment in CSR activities. However, when the cost of CSR investment is low, the supplier can increase the investment in CSR to enhance market demand and earn a higher profit. This finding suggests that when the CSR investment cost is high, the retailer should share their revenue with the supplier in order to motivate the supplier’s CSR investment. Otherwise, the retailer should retain most of their sales when the cost of CSR investments is low. Fig. 6. Impact of sharing ratio, φ, on CSR effort level under RV-BF strategy In Proposition 7, we study the impact of sharing ratio on the firm-level profits Proposition 7 . Under RV-BF strategy, if the demand follows Uniform [0, A]: (a) the supplier’s profit function is convex function in sharing ratio φ. Moreover, supplier’s profit is convex decreasing in φ for φ φ* where ∗ ; (b) the retailer’s profit is a = monotone or unimodal function of the sharing ratio; (c) the optimal level of revenue-sharing that maximises the retailer’s profit is φ* = min[max[0,],1], where = 8 + 8 + (−8 − 24 − 8 )#1 + (18 + 12 )#1 + (−4 − 6 )#1 + #1 &,1 In Proposition 7 (a), the supplier’s profit is always decreasing with the sharing ratio as the CSR investment cost parameter is high, whereas the supplier can increase the profit with a high sharing ratio only if the CSR investment cost parameter is low. By Proposition 7 (c), we describe the existence and uniqueness of optimal sharing ratio in case that the retailer has full power in the SC. From Proposition 7 (c), we find that the optimal decision of the retailer on sharing ratio is critically contingent on the consumer sensitivity to CSR. Consider a special case: a=0, i.e., the market demand is not influenced by CSR, we can readily obtain φ=1, that means the retailer will adopt a WP contract without controlling on price to obtain the highest profit in this case. For the general case, i.e., a>0, we computationally demonstrate the impact of a on the retailer’s choice of sharing ratio. From Fig.7, we can observe that the optimal sharing ratio decreases with the increase in consumer sensitivity to CSR. This implies that the retailer should share a higher proportion of revenue with the supplier as the consumer sensitivity to CSR increases. 447
11. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 Fig. 7. Impact of consumer sensitivity on the sharing ratio under RV-BF strategy 3.4. Revenue sharing contract with trade credit (RV-TC) The timing of the supply chain decision events under the RV-TC strategy is depicted in Fig. 2. In stage 1, the revenue sharing ratio is determined by the retailer. If the supplier accepts the revenue sharing agreement, then the supplier determines the CSR level and sets a postponed wholesale price. Subsequently, the retailer announces her order quantity (q 3) and delays the payment to the end of selling period. At the end of the period, the demand is realized; the retailer harvests revenue () = and pays φ φ to the supplier. The retailer’s problem under RV-TC , (), + (1 − )() strategy can be written as φ π φ . Assuming φ; otherwise, the retailer has , (. ) = () − 0 < < (a) The profit function of the supplier is concave in θ for a given { φ, w3} and monotonically increasing in w3 for a given { φ,θ}. (b) The optimal decisions in equilibrium does not depend on the choice of φ and are as follows: (i) postponed wholesale price is ∗ φ ; (ii) CSR level is: θ∗ () , (iii) order quantity is ∗ = = − = ( ()); (iv) supplier's profit is π∗ ( ( )()); (v) retailer's profit is π∗ . = − () = 0 (2) As φ and , < 0 < < (a) The profit function of the supplier is concave in w 3 for a given { φ, θ} (b) The level of effort invested and postponed wholesale price charged by the supplier in equilibrium are { w3(φ), θ(φ)}={ (() )}, the order quantity is φ , − () ( ) = (()()), and firm-level profits are () {π φ π φ }={ (( () ) (() () )), ( ), ( ) () ((()))(()())}. − (()) We find in Proposition 8 (1a) and (2a) that when the sharing ratio is low, i.e.,, the supplier’s profit first increases with w3 and then decreases with w 3 when w 3 passes a certain value, whereas the supplier’s profit is always increasing in w3 for a high sharing ratio. Hence, we find a threshold policy of φ and the corresponding impact of w 3 on the supplier’s profit is robust. We can further observe from Proposition 8 (1b) that the retailer earns zero profit with a high sharing ratio. This result suggests that the retailer will never retain more than 50 percent of earned revenue to obtain the highest profit. By φ examining the sign of the functions π φ and π φ with respect to for the case of φ , we find ( ) ( ) < that as the sharing ratio increases, the supplier’s profit always decreases with φ, whereas, the retailer’s 448
12. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 profit first increases and then decreases after a threshold value, as has been shown in Fig. 8. Therefore, as a supply chain leader, the retailer will decide on the sharing ratio to maximize her profit. Next in Proposition 9, we characterize the optimal decision in terms of sharing ratio Fig. 8. Impact of φφφ on the retailer’s profit as φ . < Proposition 9. When retailer is the dominant player and embodies the channel power, the equilibrium level of revenue-sharing is φ* so that φ*∈(0,1/2) where ∗ = 2 − 4 + 2 + 8 − 16 + 8 + 8 − 16 + (− + 2 − − 12 + 24 − 12 − 36 + 40 − 16 − 32)#1 + (3 − 6 + 3 + 12 − 36 + 18 + 12 − 48)#1 + (−4 + 6 − 3 − 16 + 12 − 8 − . 16 )#1 + (−2 + − 4 )#1 &,2 4. Comparisons of different supply chain strategies In the preceding section, we have investigated the supply chain performance under the four different strategies. In this Section, we provide a numerical study to make comparisons among them. For purpose of comparison, we suppose the following parameters: the market demand without CSR investment follows Uniform [0, 50]; the unit production cost is 0.3; the unit retail price is one and the CSR investment cost parameter is 0.1. We fix these parameter values while changing the consumer sensitivity to CSR investment to investigate the supply chain performance under four strategies. In table 2, we present the results of the optimal decisions and the resulting profitability with some representative values of parameters a in the range [0, 4]. As shown in Table 2, the WP-TC strategy makes the profits of the supplier, the retailer, and the supply chain all higher than the profits under the WP-BF strategy. In addition, as consumers are less sensitive to CSR investment, the WP-TC strategy leads to higher CSR level compared to the WP-BF strategy. This observation suggests that WP-TC strategy is an important way to promote the cooperation among CSR supply chain members. Comparing the profit of the entire SC under four strategies, we obtain the following observations: The total profit of the supply chain is largest under RV-TC strategy and smallest under WP-BF strategy. Profitability under the WP-TC strategy and RV-BF strategy is between the two extremes, with profit under the WP-TC strategy is higher than that under RV-BF strategy. Thus, RV-TC strategy is conducive to increases SC profitability. However, comparing the retailer’s profit under four strategies reveals that the retailer’ profit is smallest under RV-TC strategy, thus the retailers have no incentive to implement RV-TC strategy. In contrast, RV-TC strategy yields the highest profit for the supplier. From the CSR viewpoint, comparing the CSR level under four strategies shows that the CSR level is highest under the RV-TC strategy regardless the consumer sensitivity to CSR investment. Thus, RV- TC strategy is conducive to improve the CSR investment of the entire supply chain. 449
13. Kỷ yếu H ội th ảo qu ốc t ế “Th ươ ng m ại và phân ph ối” l ần 1 n ăm 2018 Table 2: Computational results of the optimal decisions and the resulting profits for different strategies Consumer sensitivity to CSR 0 0.4 0.8 1.2 1.6 2 2.4 2.8 3.2 3.6 4 WP-BF strategy Retailer's profit 6.13 6.17 6.32 6.56 6.88 7.26 7.67 8.02 8.16 7.78 6.13 Supplier's profit 12.25 12.30 12.45 12.71 13.09 13.61 14.31 15.24 16.47 18.12 20.42 SC's profit 18.38 18.47 18.77 19.26 19.96 20.87 21.98 23.26 24.63 25.90 26.54 CSR level 0.00 0.70 1.42 2.18 2.99 3.89 4.91 6.09 7.53 9.32 11.67 WP-TC strategy Retailer's profit 6.82 6.87 7.04 7.31 7.69 8.18 8.76 9.43 10.19 11.02 11.92 Supplier's profit 16.81 16.92 17.22 17.72 18.39 19.22 20.20 21.28 22.45 23.69 24.98 SC's profit 23.63 23.79 24.26 25.03 26.09 27.40 28.96 30.71 32.65 34.72 36.89 CSR level 0.00 1.01 2.01 2.97 3.89 4.76 5.56 6.30 6.96 7.54 8.05 RV-BF strategy Optimal sharing ratio 1.00 0.99 0.97 0.94 0.90 0.85 0.79 0.73 0.65 0.57 0.50 Retailer's profit 6.13 6.17 6.32 6.56 6.90 7.31 7.78 8.26 8.74 9.18 9.57 Supplier's profit 12.25 12.35 12.64 13.14 13.85 14.81 16.11 17.85 20.14 23.00 26.41 SC's profit 18.38 18.52 18.96 19.70 20.74 22.12 23.88 26.11 28.88 32.18 35.98 CSR level 0.00 0.71 1.44 2.24 3.12 4.11 5.21 6.45 7.81 9.26 10.77 RV-TC strategy Optimal sharing ratio 0.10 0.10 0.10 0.11 0.11 0.11 0.12 0.12 0.13 0.13 0.13 Retailer's profit 1.00 1.03 1.10 1.24 1.44 1.72 2.07 2.53 3.09 3.76 4.55 Supplier's profit 23.00 23.16 23.63 24.40 25.46 26.80 28.41 30.25 32.30 34.56 37.00 SC's profit 24.00 24.18 24.73 25.64 26.90 28.52 30.48 32.77 35.39 38.32 41.55 CSR level 0.00 1.28 2.55 3.80 5.02 6.21 7.35 8.45 9.50 10.49 11.43 5. Conclusion In this paper, we investigate four strategies for a supply chain where the retailer is capital- constraint and has the power to dictate the wholesale price while the supplier can invest in corporate social responsibility activities to increase the market demand. The four strategies are wholesale price contract with bank financing (WP-BF), wholesale price contract with trade credit (WP-TC), revenue sharing contract with bank financing (RV-BF), and revenue sharing contract with trade credit (RV- TC). Building on a game-theoretic model, we obtained the optimal wholesale price, order quantity, CSR level, supplier's profit, and retailer's profit under the four strategies, respectively. We have also numerically compared the optimal decisions for these strategies. Our analysis shown that both the consumer sensitivity to CSR investment and the CSR investment cost parameter play an important role in determining the optimal wholesale price under each strategy. In addition, by comparing the equilibrium results under the four strategies, we found that WP-TC strategy performs better than WP- BF strategy for all supply chain partners, whereas, RV-TC strategy can improve the CSR level and the overall profitability of the supply chain, but the dominant retailer is not benefit under such a strategy. Thus, adding new incentives to ensure the retailer's benefits is necessary to encourage retailers enter into a RV-TC strategy, and this is a direction for our future research. REFERENCES 1. Facenda, V. L. (2004). Caught in the squeeze. Retail Merchandiser 44(5) 20–24. 2. Hsueh, C.-F. (2014). Improving corporate social responsibility in a supply chain through a new revenue sharing contract. International Journal of Production Economics , 151, 214-222. 450
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