Optimal Decisions and Coordination Mechanisms for a Fresh Agricultural Product Supply Chain System

Abstract

For a one-supplier-one-retailer agricultural product supply chain, quantity and quality of the agricultural products often reduce because their own perishable and anthropogenic factors in the process from the supplier via the retailer to final consumers. This paper takes shortage and deterioration factors into account, establishes related profit functions of the supplier and the retailer, obtains the optimal ordering cycle and quantity decisions, and analyzes the impact of deterioration on decision makers under the decentralized system. To maximize the total profit of supply chain, we explore coordination mechanisms for the supply chain when considering shortage and deterioration factors, such as revenue sharing contract, quantity discount contract and buy-back contract. By comparing these different contracts, the coordination effect is analyzed in details. Finally, through series of numerical analysis, some managerial insights are provided.