Inventory management for aging products with supply chain finance: the warehouse financing option

Abstract

For businesses specializing in ameliorating goods, such as seasoned cheese, traditional financing models pose unique challenges. Inventory financing relies heavily on past performance, often overlooking the inherent value increase associated with proper aging. This can lead to limited access to capital, hindering growth and operational stability. Warehouse financing emerges as a specialized solution specifically designed for businesses with maturing inventory. Lenders recognize the future value potential of these goods, offering secured loans based on anticipated market appreciation. This approach unlocks immediate cash flow, empowering businesses to cover operational costs, invest in expansion, or manage cash flow fluctuations. This study develops and discusses inventory problems for the specific class of "ameliorating" products, integrated with the warehouse financing technique, to combine the two topics and highlight their main features but above all their scientific and practical importance. The models proposed are focused on a decentralized scenario (single actor perspective) and a centralized scenario (supply chain perspective) to compare the optimal solution in terms of the aging period while maximizing the annual profit. Furthermore, from the supply chain perspective, a multi-supplier single-manufacturer supply chain is proposed with a deteriorating raw material (i.e., fresh milk). While cheese is a prime example, warehouse financing can benefit a diverse range of businesses dealing with ameliorating goods (such as wines, coffee, and aged spirits).