Analysis of cold-chain service outsourcing modes in a fresh agri-product supply chain

Abstract

Motivated by the wide utilization of cold-chain service outsourcing, this paper examines the effect of outsourcing mode on decisions and profits by developing game-theoretic models for a fresh agri-product supply chain consisting of one supplier, one retailer, and one third-party logistics provider. There are two service outsourcing modes: supplier-outsourcing and retailer-outsourcing. Supplier (retailer)-outsourcing represents that the supplier (retailer) outsources cold-chain service to the logistics provider. When the supplier is the leader, we find that: (i) under traditional quantity discount scheme, the retailer prefers retailer-outsourcing if both service cost and market size are low, or service cost is high. Otherwise, supplier-outsourcing is better if service cost is low and market size is high. How the supplier prefers outsourcing mode is similar to the retailer. Therefore, there may exist an outsourcing mode preferred by both the supplier and the retailer. (ii) Retailer-outsourcing is more profitable to the logistics provider than supplier-outsourcing. (iii) Service level-dependent quantity discount is an important factor determining which outsourcing mode is beneficial to the retailer and the logistics provider. Further, we consider an alternative case in which the retailer is the leader, and we uncover the conditions under which an outsourcing mode outperforms the other. Comparing the two cases, we find that the decision sequence between the supplier and the retailer is important for which outsourcing mode is beneficial to supply chain members.