Benefit assessment for innovative models of inventory financing

In the last years the economic and financial scenario pictured a situation where Small-Medium Enterprises (SMEs) are the most damaged because they often need liquidity, but financial institutes face several difficulties granting them funds due to their low creditworthiness. Thus, since SMEs are the weakest companies in a supply chain, they are also the riskiest one, facing constantly the risk of bankruptcy. In this context, several Supply Chain Finance (SCF) solutions have been developed, among which Inventory Financing (IF). IF is a type of asset based lending, namely a short-term loan granted to a company whose inventory serves as collateral for the financial provider; then, if the business can not repay the loan, the financial provider will become the owner of the collateral. The academic literature has addressed the IF topic often just with a qualitative approach such as researches and theoretical models that explain the typical processes and benefits tied up with this SCF approach. The main objective of the work is to evaluate the benefits of two Innovative Inventory Financing solutions (IIFSs), namely Control Mode (CM) and Delegation Mode (DM), through a mathematical model that explains the processes occurred in a supply chain after the adoption of one of these IF solutions. The model provides different insights on the optimal conditions under which CM and DM work better and the scenarios where they do not perform well. Furthermore, the model investigates and assesses the benefit of a supply chain combining an IIFS with a specific inventory reorder policy.