Decision of the supply chain with bidirectional option based on demand information update and funding constraints

We consider a supply chain consisting of a supplier and a retailer with an information update. The retailer with funding constraints has two procurement opportunities with the second one to exercise its bidirectional option after observing a market signal, which updates the demand information, the optimal first-stage order quantities for goods and real-bidirectional option. The supplier is a core enterprise in the supply chain, which also has two delivery opportunities: the first-stage has low-cost with long leading time and the second-stage has high-cost with short leading time. The bank is risk neutral in making the decision of the loan interest rate. A newsvendor model is built to analyze the decisions. The conclusions can provide references for small and medium enterprises with financial constraints, thus encouraging the core enterprise of the supply chain to use bidirectional option to improve the financing situation of SME.