Freshness-keeping efforts and value-added service choice in fresh food supply chain

Abstract

This study investigates a two-tier fresh food supply chain consisting of one supplier and one fresh food e-retailer. Freshness-keeping efforts can be provided by either the supplier or fresh food e-retailer, while the latter also offers value-added service. Two leadership scenarios—the e-retailer-led (i.e., the e-retailer decides service level before the supplier decides wholesale price) and the supplier-led (i.e., the e-retailer decides service level together with retail price after the supplier decides wholesale price)—are examined. Combining the leadership scenarios and the freshness-keeping strategy produces four typical models. By analyzing the equilibrium, we have the following findings. First, in both freshness-keeping strategies, postponing service level decisions (supplier-led scenarios) leads to higher freshness-keeping efforts and service levels, resulting in higher profits for the supplier and e-retailer. Furthermore, under the same leadership scenarios, both supplier and e-retailer experience increased profits when the e-retailer undertakes freshness-keeping efforts. Finally, in the absence of freshness-keeping efforts, timely service level decision leads to lower wholesale prices, allowing the retailer to obtain more incredible discounts from the manufacturer. However, the significant increase in demand still leads to a substantial improvement in the latter's profits.