Abstract

This paper considers a food supply chain where multiple suppliers provide completely substitutable food products to two manufacturers. Meanwhile, the suppliers face yield uncertainty and the manufacturers face uncertain production costs that are private information. While the suppliers compete on price, the manufacturers compete on quantity. We build a stylized multistage game theoretic model to analyze the issue of vertical cost-information sharing (VCIS) within the supply chain by considering key parameters, including the level of yield uncertainty, two manufacturers’ cost correlation, the correlated coefficient of suppliers’ yield processes, and the number of suppliers. We study the suppliers’ optimal wholesale price and the manufacturers’ optimal order quantities under different VCIS strategies. Finally, through numerical analyses, we examine how key parameters affect the value of VCIS to each supplier and each manufacturer, respectively. We found that the manufacturers are willing to share cost information with suppliers only when the two manufacturers’ cost correlation is less than a threshold. While a high correlated coefficient of suppliers’ yield processes and a large number of suppliers promote complete information sharing, a high level of yield uncertainty hinders complete information sharing. All these findings have important implications to industry practices.

Highlights

  • Information asymmetry between supply chain (SC) members is a great challenge for food SC management

  • Our work is different from those works above in that we examine the incentive for vertical cost-information sharing (VCIS) within a SC which has n-suppliers and two competing manufactures

  • Information sharing is a hot topic in the literature of SC management

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Summary

Introduction

Information asymmetry between supply chain (SC) members is a great challenge for food SC management. Our work focuses on vertical cost-information sharing by considering the suppliers with yield uncertainty. Keizer et al [7] and Jin et al [8] investigated food SC by considering supply network and food traceability, respectively They examined food SC in a complete information situation, whereas in reality information asymmetry between upstream and downstream SC firms often exists. The marginal costs are uncertain due to uncertain labor cost, uncertain storage costs, and other uncontrollable factors Both supply uncertainty and cost uncertainty directly affect upstream and Journal of Food Quality downstream SC firms’ wholesale prices and order quantity decisions. How do suppliers and manufacturers make decisions on wholesale prices and order quantities, respectively, under different VCIS scenarios? We found that both manufacturers are willing to share cost information with their suppliers.

Related Work
Model Framework
Equilibrium Solutions
Information Sharing Game
Numerical Analysis
Conclusions
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