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Investment and coordination decisions in a supply chain of fresh agricultural products

Author

Listed:
  • Ilkyeong Moon

    (Seoul National University
    Institute for Industrial Systems Innovation)

  • Yoon Jea Jeong

    (Seoul National University)

  • Subrata Saha

    (Seoul National University)

Abstract

This paper investigates investment decisions in a supply chain of fresh agricultural products. Based on investment decisions of supply chain members, three different scenarios are considered, and the corresponding results are compared by considering the impact of fairness indices. In the decentralized scenario, joint investment in maintaining product freshness is profitable for both the manufacturer and retailer; however, the manufacturer utility decreases progressively with an increase in the retailer fairness index. To coordinate and achieve a win–win outcome, and maintain fairness for each member, revenue sharing coupled with investment cost sharing is proposed. To enforce this contract, the manufacturer may need to charge negative wholesale prices, but as a result, the highest utility for the supply chain cannot be achieved. In an alternative approach, an incremental quantity discount contract may encourage the manufacturer to charge a wholesale price greater than the marginal cost such that both members of the supply chain achieve the highest utility possible. Extended numerical investigation provides insights on ways to manage an efficient joint-investment strategy for a sustainable fresh agricultural products supply chain.

Suggested Citation

  • Ilkyeong Moon & Yoon Jea Jeong & Subrata Saha, 2020. "Investment and coordination decisions in a supply chain of fresh agricultural products," Operational Research, Springer, vol. 20(4), pages 2307-2331, December.
    • Handle: RePEc:spr:operea:v:20:y:2020:i:4:d:10.1007_s12351-018-0411-4
    DOI: 10.1007/s12351-018-0411-4
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    6. Min Li & Zhen Lian & Guangchuan Yang & Liaoning Li, 2023. "Profit-Sharing Contract of the Fresh Agricultural Products Supply Chain under Community Group Purchase Mode Considering Freshness Preservation Efforts," Sustainability, MDPI, vol. 15(9), pages 1-22, May.

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