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Pierre-Yves Brunet has a BS in industrial engineering from Purdue University and is pursuing a PhD in industrial and operations engineering. His research interests are in Asymmetric Information, Finance, Financial Engineering, Risk Management and Supply Chain Management. He is currently working on "The effect of trade credit on operational policies and on the relationship between suppliers, manufacturers and lenders in a competitive environment" with professor Babich (IOE).
Presentations
Brunet, Pierre-Yves, V. Babich, G. Aydin, J. Keppo, R. Saigal “Trade Credit vs Bank Financing. Financing Sources and the optimal Number of Suppliers” Chicago, IL
Production and Operations Management Society, Sixteenth Annual Conference of POMS (May 2005)
Brunet, Pierre-Yves, V. Babich "Signaling Value of Trade Credit" Pittsburgh, PA
2006 INFORMS ANNUAL Meeting (November 2006)
Current Research
Brunet, and Babich "Valuation of Trade Credit as an option to acquire future financing"
Abstract: Start-up firms, denied bank loans because banks are uncertain about creditworthiness of the firms, benefit from trade credit financing because it allows them to implement their production decisions in the current period and because it signals their credit quality to the banks. Using a multi-period model for the operations of the firm, we study joint procurement and financing decisions, characterize properties of the optimal policy, and compute the signaling value of trade credit financing.
Babich, Aydin, Brunet, Keppo, Saigal "Risk, Financing and the Optimal Number of Suppliers"
Abstract: We study how supply risk, fixed supplier costs, financial constraints, and the dual role played by the suppliers as the providers of parts and the financiers of the manufacturer affect the relationship among firms in a supply chain, supplier selection, and supply chain performance. Using a one-period model, we consider joint procurement and financing decisions of a firm with limited financial capital, facing either an uncertain demand or an uncertain supply. We find that the optimal financing decisions are consistent with the financial “pecking order” theory and we characterize the optimal operational decisions. Our analysis suggests that the alternative financing sources (bank loans and trade credit) are complementary and that the firm uses more suppliers if the bank financing is not available. Surprisingly, we also find that the limit on the supplier loans and the wholesale price affect the optimal number of suppliers in a non-monotone way. By considering tradeoffs between the expected profit and the value of the option to default, we explain the effects of supply uncertainty on the shareholders’ value and the optimal decisions. Finally, we address the question of whether the firms operating in the developing economies should contract with more suppliers than the firms operating in the developed economies. The answer is “no”, if the fixed cost of an extra supplier is high. However, financial constraints will force firms in the developing economies to the suboptimal level of production and cause higher stock-out rates.
(paper can be found at http://www-personal.umich.edu/~babich/)
