This chapter provides a structured overview of supply chain finance (SCF), presenting both theoretical and practical insights. We discuss the diverse scopes of SCF and propose categorization approaches to contextualize application. Following this, the chapter examines various supply chain financing instruments, elaborating their mechanisms within a conceptual framework. Our exploration then shifts to the effects and obstacles associated with SCF implementation. The chapter concludes by outlining promising research directions, aiming to inspire further advancements in the field. This comprehensive approach not only highlights the current state of SCF but also sets the stage for future exploration and innovation in addressing financial constraints in supply chains.

This paper examines a two-period dynamic contracting in a supply chain under information asymmetry, where a supplier sells a product to a retailer via a trade credit contract. It is found that the retailer always prefers to conceal her actual cost information thus signal as a higher-cost type in the first period to pursue a higher information rent, which would decrease the supplier’s profit and thereby the overall profit of the supply chain. To mitigate this ratchet effect, we introduce a reputation compensation mechanism in the two-period trade credit setting. This mechanism could alleviate the information asymmetry to a certain extent as there exists a threshold that incentivizes the retailer to share her true cost information in the earlier period. Moreover, the retailer might claim as a lower-cost type when the supplier offers a relatively higher reputation compensation to take full advantage of her information. Therefore, the supplier should provide trade credit with a reasonable reputation compensation in a two-period setting to enhance his expected profit.