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Platform vs. 3PL Financing: Strategic Choice of Lending Model for an E-tailer Under Operational Risk

Rath, Sambit Brata, Govindan, Kannan, Mandal, Prasenjit, Basu, P (2024) Platform vs. 3PL Financing: Strategic Choice of Lending Model for an E-tailer Under Operational Risk. Transportation Research Part E: Logistics and Transportation Review, . ISSN 1366-5545. (In press) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided) (KAR id:104963)

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In addition to providing logistics services, third-party logistics (3PL) firms (e.g., S.F. Express) have recently started extending financial services to capital-constrained e-tailers (referred to as 3PL financing (LF)). Another novel financing mode available for e-tailers is platform financing (PF), in which online platforms such as Amazon and Alibaba provide loans to e-tailers on their platforms. Both LF and PF facilitate trade in a capital-constrained supply chain. However, in the presence of an e-tailer’s operational risk, the lenders are exposed to credit risk, which can negatively impact the whole supply chain. Moreover, when both financing modes are available, the e-tailer must develop an optimal borrowing strategy. Multiple factors, such as bankruptcy cost, referral fee, and shipping fee, can significantly influence players’ financing decisions. Therefore, this paper examines supply chain members’ optimal operational and financing decisions under LF and PF. We study a three-tier supply chain in which an e-tailer, exposed to operational risk, procures a product from a supplier via the 3PL firm and resells it to end customers through the online platform. The e-tailer obtains the working capital either through LF or PF. We find that at low (high) levels of operational risk, the e-tailer chooses LF (PF). Surprisingly, the platform and the 3PL firm do not always benefit from the PF and LF. We recommend a decision support framework for the e-tailer’s optimal financing strategy for different product categories based on its operational risk. We show that for products with a low (moderate and high) referral fee, LF (PF) achieves a win-win-win outcome under low (high) operational risk. Further analysis shows that the e-tailer’s initial working capital, logistics and product costs can alter the players’ financing decisions.

Item Type: Article
Uncontrolled keywords: E-commerce; platform financing; 3PL financing; operational risk; game theory
Subjects: H Social Sciences > HF Commerce
Divisions: Divisions > Kent Business School - Division > Department of Analytics, Operations and Systems
Funders: University of Kent (
Depositing User: Preetam Basu
Date Deposited: 12 Feb 2024 11:17 UTC
Last Modified: 13 Feb 2024 11:52 UTC
Resource URI: (The current URI for this page, for reference purposes)

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