Configurations of financing instruments for supply chain cost reduction: evidence from Chinese manufacturing companies

Abstract

Purpose

Although supply chain finance (SCF) aims to optimize capital flows in the supply chain process, its effectiveness in improving cost performance remains controversial. From the perspective of efficiency motives, this study aims to explore how the combinations of SCF solutions and traditional financing instruments lead to supply chain cost reduction.

Design/methodology/approach

A mixed-method approach is used in this study. First, using the fuzzy-set qualitative comparative analysis (fsQCA), the authors analyze 405 survey data across four industries in China and identify the configurations of financing instruments for supply chain cost reduction. Second, to better understand the reasons behind each configuration, the authors conduct the content analysis on the interview data composed of 24 Chinese companies.

Findings

The authors find that the effectiveness of SCF solutions for supply chain cost reduction is related to the focal company's use of traditional financing instruments. Moreover, compared with guaranteed financing, companies that use credit financing are more likely to adopt SCF solutions to achieve supply chain cost reduction. Finally, the effectiveness of SCF solutions in reducing supply chain costs varies greatly across industries.

Practical implications

The study’s findings provide insights for policymakers and SCF practitioners in the aspects of simplifying the SCF application.

Originality/value

This study contributes to the current literature by addressing the theory–practice gap related to SCF. The study also provides new understandings of factors related to supply chain cost reduction, as well as factors that influence SCF adoption.

Citation

Li, L., Wang, Z. and Zhao, X. (2022), "Configurations of financing instruments for supply chain cost reduction: evidence from Chinese manufacturing companies", International Journal of Operations & Production Management, Vol. 42 No. 9, pp. 1384-1406. https://doi.org/10.1108/IJOPM-12-2021-0755