Effects of Financial Constraints on Supply Chain Financing Choices and Operational Decisions

Management Science · 2025-10-28

Bank credit access allows firms to borrow funds from banks and other financial institutions. Although theories have been developed on how bank financing affects firms’ operational decisions, empirical investigations in operations management (OM) literature remain limited. This study examines firms’ inventory management strategies in response to the enhanced credit lines from the adoption of interstate bank branching laws, which introduced staggered access to bank credit for operational firms. By merging multiple datasets with credit line information from 10-K SEC filings, we constructed a panel data set covering 1990–2005. Utilizing a difference-in-differences (DID) approach, we find that improved bank credit access leads to a 6% faster inventory turnover, rather than an increase in inventory investment. This outcome appears to stem from short-term increases in capacity investments leveraging their enhanced bank credit and increased use of trade credit, alongside long-term improvements in infrastructure and capital intensity. While these developments are more pronounced for small firms in concentrated markets, their advantage translates into increased competition, negatively impacting the market position and profitability of larger firms. Additionally, in a broader supply chain context, focal firms experience faster inventory turnover when their major customers access more bank credit. The effect is especially prominent for large suppliers in competitive markets, driven by increased sales volumes. This research enhances understanding of the extensive impact of bank credit on operational management and offers insights for policymakers about the diverse effects of bank regulations across different market players and sectors. This paper was accepted by J. George Shanthikumar, data science. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.08465 .

Optimal Processing and Trading for a Commodity in the Presence of Inventory Conversion Flexibility and Random Supply

Production and Operations Management · 2025-04-02

This paper presents a decision support system used by an agricultural cooperative in the Indian states of Andhra Pradesh and Telangana to optimize the purchase, blending, sale, and storage of groundnuts for maximum profit. The cooperative buys raw groundnuts (input commodity) from member farmers and processes them into multiple grades of groundnut seeds (output commodity). These may then be blended to create intermediate grades to exploit arbitrage opportunities. The cooperative sells part of the output on the spot market while storing the rest for future periods. A key challenge is the random supply of input commodity—driven by the cooperative’s obligation to accept all member produce—and the option to blend the output. Unlike prior work, this study examines blending across a multiperiod planning horizon, a novel aspect in operations management literature. The problem is modeled as a dynamic program over a harvest season. We analyze the structure of the optimal value function and decisions and find that the function is not separable in input and output inventories, which complicates the identification of optimal solution. However, in special cases such as when blending is disallowed, the function simplifies. An efficient computational procedure is developed for the general case. Using real cooperative data, we demonstrate that multiperiod blending significantly boosts profits—by 100–900%, or Indian National Rupees 1.94–17.46 million annually—highlighting the value of this approach.

Leveraging Social Media for COVID-19 Response: Insights from a Data Competition

Foundations and Trends® in Technology Information and Operations Management · 2025-03-12

The COVID-19 pandemic accelerated the adoption of digital platforms across various sectors, notably in education and healthcare, with remote learning and social media emerging as pivotal tools for communication and crisis management. Social networks played a crucial role in disseminating critical information, combating misinformation, and fostering community engagement. Recent research underscores the significance of social media in shaping public behavior towards adopting protective measures against COVID-19, yet quantifying its precise impact remains challenging due to the complexity of social relationships and diverse information sources. Multimodal data generated by social media platforms presents opportunities for more insightful Machine Learning (ML) models, but also poses technical challenges in data integration and interpretation. Leveraging crowdsourcing, we organized a data science competition aimed at forecasting COVID-19 positivity rates and identifying factors influencing its spread using infection and social media data. The competition facilitated collaborative problemsolving and provided actionable insights for public health communication and policy-making. This study outlines the competition structure, methodologies employed by participants, key findings, and implications for future pandemics and public health crises.

Strawberry or Vanilla This Week? How to Optimize Tailored Assortments for Variety Seeking/Avoiding Consumers

SSRN Electronic Journal · 2024-01-01

Adjustments to Supply Chains in Response to the COVID-19 Pandemic: A Survey

Business Cases Review · 2024-01-01 · 3 citations

Impacts of COVID-19 on Supply Chains

Business Cases Review · 2024-01-01 · 5 citations

Corporate Governance and Related Party Transactions in Global Supply Chains

Manufacturing & Service Operations Management · 2024-03-21 · 2 citations

Problem definition: As related party transactions (RPTs) increase in global supply chains, understanding the impact of corporate governance on such transactions becomes crucial for businesses. RPTs often lead to operational diversion due to power disparities between parent and its subsidiaries. In this study, we explore how operational diversion in RPTs within multinational firms is affected by the roles of foreign subsidiaries and corporate governance mechanisms. Methodology/results: Using a unique data set on RPTs of Korean multinational firms from 2006 to 2013, we compare the performance of multinational firms engaging in RPTs with two types of foreign subsidiaries: vertical and horizontal. We conduct our empirical analysis based on the adoption of International Financial Reporting Standards (IFRS) in Korea in 2011, which acts as a policy shock affecting corporate governance and deterring operational diversion. Our results show that the improvement in operational performance of a multinational firm following the IFRS adoption is more significant when the parent firm engages in transactions with vertical subsidiaries compared with horizontal ones. We further show that strong corporate governance mechanisms, such as internal governance, institutional ownership, and large shareholders, play a crucial role in restraining operational diversion in RPTs involving vertical subsidiaries. Managerial implications: The implications of our study extend to shareholders and auditors, highlighting the importance of prioritizing monitoring efforts concerning a parent firm’s RPTs with vertical subsidiaries, especially when corporate governance mechanisms are weak. In contrast, RPTs with horizontal subsidiaries are relatively robust against operational diversion, making them a natural deterrent to such malpractices. Funding: This work was supported by the Institute of Management Research at Seoul National University, the Hankuk University of Foreign Studies Research Fund [2023], and the Research Fellowship Fund of the Sangnam Institute of Management, Yonsei University [2020-22-0007]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.0372 .

Analytical modelling and experimental study on the design optimisation of an electromagnetic retarder

International Journal of Heavy Vehicle Systems · 2024-01-01

An investigation on design optimisation of an electromagnetic retarder has been carried out as it is crucial to balance braking performance and structural mass of assembly. This paper presents a cost-effective mathematical model as an alternative to expensive and time-consuming computational methods for predicting braking performance, considering factors like eddy current power loss, skin effect, and the magnetic reluctance of excitation devices, which were not addressed in earlier studies for a complex system with higher capacity in dynamic conditions. The mass and torque-influencing factors are systematically assessed to optimise the design, which provides significant mass savings while maintaining the necessary performance levels with the analytical results in close agreement with the experimental findings. The optimised design led to a 12.3% reduction in mass compared to the initial design, with only a 2.1% decrease in performance. The study offers guidance for manufacturers to optimise the design to fit the vehicle's needs.

Outsourcing as a Risk Management Mechanism for Domestic Manufacturing Capacity Investment

Foundations and Trends® in Technology Information and Operations Management · 2024-08-21

We propose two perspectives on the shift from U.S. domestic manufacturing to Asia in 1990–2011: production cost arbitrage and the management of supply-demand mismatch. In our model, a firm facing demand uncertainty decides between investing in domestic or overseas production capacity. The model predicts greater investment overseas when the cost arbitrage is high, switching cost is low, demand volatility is high, and the systematic risk in demand is above a certain threshold. Empirically, we observe strong support for the cost arbitrage motive in 1990–2000 and the risk management motive in 2001–2011, i.e., after China’s entry into the WTO. We estimate that investing into risk mitigation could have saved more than 400,000 U.S. manufacturing jobs.

Managing flexibility in supply chains: mathematical analysis of dual sourcing systems

IMA Journal of Management Mathematics · 2024-08-21

Abstract Accepted by: Konstantinos Nikolopoulos The COVID 19 pandemic forced supply chain managers to explore different ways to cope with rapid changes in supply, manufacturing, distribution and demand. The lessons learnt from that experience is that flexibility in responding to demand and modularity must be planned at every stage. Along with planning, we argue that execution becomes challenging and is equally important to consider when making plans. We illustrate with a broad category of flexibility and modularity, dual sourcing, and how management mathematics can be used to manage these systems and understand the cost of execution. Dual sourcing has been used to manage the trade-off between cost and responsiveness by firms and has received considerable attention in academic literature. It is known that except in special cases, the optimal sourcing policy does not have an easy structure that is practically appealing and can be used by managers. Over the last decade and half, researchers have developed various management mathematics techniques and analyzed the performance of heuristic policies. This paper presents a discussion of the results in a few key papers related to the dual-sourcing inventory management problem and recent distribution free results in asymptotic regions. The asymptotic regimes considered include systems where the lead-time from the slower supplier is significantly higher than that from the closer, faster supplier and conditions where the unit cost of procurement is significantly higher compared to the unit cost of carrying inventory. These regimes represent different conditions about how valuable or costly using the faster supplier is and illustrate the value of simple heuristic policies and characterize the cost of these heuristics. The key learnings are that optimal ordering decisions may be robust to misspecification of demand distribution and managers only need summary statistics, such as the average and standard deviation of demand to determine the order quantities from the different suppliers. Managers could also consider ways to roll out new planning and control systems for managing multiple suppliers.