Towards a framework on the factors conditioning the role of Logistics Service Providers in the provision of Inventory Financing

Abstract

Purpose: This paper explores the conditions in which logistics service providers (LSPs) can compete or collaborate with banks in offering inventory financing as a supply chain finance (SCF) service. Design/methodology/approach: A multiple case study research methodology was adopted. The case study involved six LSPs across Europe. Data were collected through semi-structured interviews. Findings: The results highlighted that an attractive credit demand for LSPs consists in suppliers with high amounts of inventory or borrowing needs that go beyond their borrowing capacity from the perspective of a bank. LSPs can respond to this demand when they have three specific capabilities as follows: risk assessment, risk monitoring and organizational capabilities. The offer of inventory financing can be controlled by the LSPs or by the banks. When the LSPs control the offer, they offer different conditions compared to the banks in terms of credit rationing, transaction costs, payment flexibility, tax rate advantage and financial risk management. When the banks control the offer, the LSPs influence the nature of the SCF services only in terms of credit rationing and transaction costs. The LSPs seem to easily develop risk assessment and risk mitigation capabilities, while the organisational capabilities appear to be the most challenging to build, and when absent they create a barrier to the provision of inventory financing. Originality/value: The value of the paper is twofold. First, the paper provides a comprehensive taxonomy of the factors conditioning the role of the LSPs in the provision of inventory financing as a SCF service. Second, the paper clarifies the link between the factors and the different roles played by the LSPs.