Contract coordination of new fresh produce three-layer supply chain

Abstract

PurposeThere are particularly high fresh agricultural product (FAP) loss rates in actual supply chain operation and the development of FAPs e-commerce is hindered to some extent. The purpose of this paper is to achieve the coordination of three-layer FAP supply chain and maximize profit through the contracts among the supply chain members.Design/methodology/approachA three-layer FAP supply chain that consists of a fresh produce e-commerce enterprise, third-party logistics service provider (TPLSP) and community convenience store under e-commerce environment is considered. New game models are developed and optimal decisions in centralized and decentralized channel are characterized. Different contract coordination mechanisms are designed to improve the supply chain performance. Finally, computational studies are conducted.FindingsThe decentralized supply chain cannot be coordinated by a freshness-keeping cost-sharing contract, and it can be coordinated by a freshness-keeping cost-sharing and revenue-sharing contract. The optimal unit online selling price, unit logistics distribution price, fresh-keeping effort and unit self-collection service price can all be achieved.Practical implicationsThe paper provides a practical guideline to managers in fresh produce industry in terms of how to cooperate with other supply chain members so as to maximize total profit and achieve Pareto improvement while also supply the freshest and safest produce to the target market under e-commerce environment.Originality/valueFew studies have explored the coordination of three-layer FAP supply chain under e-commerce environment with TPLSP and community convenience store’s participation in decisions, especially considering that the market demand for FAPs is affected by freshness and unit online selling price. In this paper, all these scenarios are taken into account and corresponding mathematical models are developed. In particular, different contract coordination mechanisms are designed and examined simultaneously.