Market adoption of reverse factoring

Purpose - The purpose of this paper is to show that market dynamics can significantly influence th lifecycle and value of a supply chain finance (SCF) arrangement. Design/methodology/approach - Based on a review of scientific and trade literature, the author construct a model of market dynamics for reverse factoring, a specific type of SCF arrangemen The authors assume that firms' participation in a reverse factoring arrangement is determined by th direct benefits they can derive from it. The authors analyse the model by means of simulation i system dynamics. Findings - The authors identify the following market factors as key for direct benefits: competitio interest rates, receivables volumes, and firms' working capital goals. The authors find that revers factoring can yield direct benefits for all supply chain participants, but that these benefits are highl sensitive to market conditions. Research limitations/implications - The model is stylized, but this study shows the need fo further research on the dynamic aspects of SCF arrangements. Practical implications - The authors show that supply chain actors should carefully consider th expected evolution of market factors when deciding on participation in a reverse factoring arrangemen Originality/value - Existing research on SCF arrangements almost exclusively considers a stati context, where market factors take fixed, known values. The authors provide the first study that link the direct benefits of SCF arrangements to dynamic, interacting market factors. The authors utilize syster dynamics, a methodology well-suited to the analysis of such settings, to show that a comprehensiv assessment of SCF arrangements cannot neglect the evolutionary perspective.