On delineating supply chain cash flow under collection risk

On delineating supply chain cash flow under collection risk

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Article ID: iaor20108314
Volume: 129
Issue: 1
Start Page Number: 186
End Page Number: 194
Publication Date: Jan 2011
Journal: International Journal of Production Economics
Authors:
Keywords: economics
Abstract:

The credit terms for accounts receivable (AR) offered by sellers to buyers not only create a time lag between supply chain physical flow and cash flow, but also increase the collection risk contributed by late collection and default. Previous studies describing the relationship between the two major supply chain flows did not consider the collection risk, which poses a serious challenge to companies with limited cash resources when seeking growth opportunities in sales. This study first delineates the relationship between the two flows during a growth period without imposing any constraints. A stochastic optimization model is then developed to observe the managerial implications of cash flow risk under tight cash constraints.

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