Optimal production and financing portfolio strategies for a third-party remanufacturing supply chain with capital constraint

This paper considers a supply chain comprising one loss-averse third-party remanufacturer (TPR) and one capital-constrained original equipment manufacturer (OEM), then investigates its optimal production and financing portfolio strategies when OEM finances through three strategies: pure bank loan (PBL), full delay-in-payment with bank loan (FDP-with-BL), and partial delay-in-payment with bank loan (PDP-with-BL). It is found that the optimal structure of PDP-with-BL strategy depends on the relative size of TPR's actual loss aversion and a threshold value. When TPR's loss aversion intensifies, PDP-with-BL gradually replaces FDP-with-BL as the most favorable financing strategy for third-party remanufacturing. OEM prefers PBL strategy, while TPR and the supply chain prefer PDP-with-BL strategy.