Supply Chain Contract Research Articles

Game—FloraPark (the Flower Game): A Supply Chain Contract and Collaboration Simulation

Intensive competition among supply chains often forces trading partners to collaborate despite their conflict of interests. Supply chain contracts and collaboration theory is well established in the academic literature to align the interests but much less conveyed to students and industry professionals for a practical impact. Although the Beer Game captures the bullwhip effect and the value of information sharing, it ignores the conflict of interests, that is, price and quantity bargaining, among the trading partners. We describe a new online teaching game, the FloraPark simulation (“the flower game” at https://flower.gamespots.net/ ), based on real-life events in the international fresh-cut flower supply chains, for students to learn supply chain collaboration via contracts in a setting of multiple supply chains competing in the same market. Students play trading partners in the flower supply chains and experiment with the push, pull, and advanced purchasing discount contracts by negotiating wholesale prices and quantities to achieve the conflicting objectives of (1) collaboration to beat other supply chains, and (2) bargaining to protect their own interests from their trading partners. Supplemental Material: The e-companion is available at https://doi.org/10.1287/ited.2022.0035 .

Profit-Sharing Contract of the Fresh Agricultural Products Supply Chain under Community Group Purchase Mode Considering Freshness Preservation Efforts

This article constructed a four-level fresh agricultural product (FAP) supply chain with a two-stage pricing strategy under a “community group purchase (CGP) platform + direct procurement from the FAP supplier” sales model. We investigate the influence of the CGP agency’s participation in the control strategy of FAP freshness preservation efforts on the profits of supply chain stakeholders. This article discusses the effects of the FAP supplier profit-sharing ratio, the CGP agency profit-sharing ratio, and consumers’ sensitivity to FAP freshness on the supply chain stakeholders’ freshness preservation efforts. Moreover, based on the fairness preference theory, this article designed a profit-sharing contract that involves the Nash bargaining game between the FAP supplier and the CGP agency as the supply chain coordination mechanism. Modeling results revealed that: (1) The CGP agency’s freshness preservation efforts increased total supply chain profits. (2) The FAP supplier profit-sharing ratio, CGP agency profit-sharing ratio, and consumers’ sensitivity to FAP freshness have a positive correlation to the profits of the FAP supply chain and promote the coordination of the supply chain. (3) Considering fairness preferences, with the increase in FAP suppliers’ business negotiating ability, their freshness preservation efforts and fairness utility both increased gradually, while the fairness utility of the CGP agency gradually decreased.

Coordination of closed loop supply chains through buyback contract

ABSTRACT This paper focuses on the coordination issues in the context of a CLSC system comprising a manufacturer and a retailer. We develop mathematical models under a buyback contract in the forward supply chain (FSC) with and without Stackelberg gaming. Compared to the case with no contracts, the numerical analysis carried out shows that the proposed models consistently provide better total SC profit, enhance the manufacturer’s profit and, in many cases, improve both players’ profits. For the model without gaming, we derive values for the buyback price that coordinate the SC and further derive ranges for the parameters where both partners are better off profitwise as compared to the no-contract case under the Stackelberg game scenario. The numerical analysis indicates that the non-gaming model always outperforms the gaming one in terms of total SC expected profit and suggests that for higher demand uncertainties, the SC members are better off profitwise at lower values of the buyback price.

Proportional incentive contracts in live streaming commerce supply chain based on target sales volume

Proportional incentive contracts in live streaming commerce supply chain based on target sales volume

Use of Blockchain-Based Smart Contracts in Logistics and Supply Chains

Blockchain is a disrupting technology that has the capability to completely alter the design, activities, and product flows in logistics and supply chain networks. It provides assurance of openness, immutability, transparency, security, and neutrality for all supply chain agents and stakeholders. In this paper, we explore the improvements and tradeoffs introduced by using blockchains in logistics management in terms of the sustainability of society, the environment, and economic dimensions of the supply chain. Blockchain technology makes it much more difficult to counterfeit products by providing indisputable and immutable proof of the provenance of the raw materials, products, and sale to the end consumer. This can potentially enhance the trust of the consumer in the product and financially benefit the manufacturer through the protection of their intellectual property rights. This paper explores the benefits, applications, and issues related to the usage of blockchain and smart contracts for logistics and supply-chain management. We focus on the implementation, deployment, audit, and operational aspects of smart contracts in the blockchain applied to terrestrial, maritime, and aerial logistics networks. The paper also discusses opportunities and challenges that arise due to the use of smart contracts in these sectors.

Blockchain-Driven Supply Chain’s Financing and Coordination Strategy under Nash Bargaining Scheme

Blockchain-driven supply chain finance (SCF) has become an emerging supply chain financing mode. Compared with the traditional SCF mode, blockchain-driven SCF can shorten the transaction process and provide real trade data that cannot be tampered with, thereby improving the efficiency of capital operation. This article explores the financing and coordination problems of a blockchain-driven supply chain. Based on the three most common supply chain contracts (revenue-sharing contract, profit-sharing contract, and two-part tariff contract), we construct a comparative model of bank credit financing (BCF) and blockchain-driven SCF, discuss the optimal decision-making strategy of the supply chain, and quantitatively analyze the performance of supply chain under each mode. The results show the following: (i) there is a threshold for the usage rate of the blockchain-driven SCF platform; (ii) only when the platform usage rate is lower than the threshold, the blockchain-driven SCF mode which benefits both manufacturer and retailer is a better choice; (iii) the above results always hold if supply chain contracts can coordinate the supply chain in terms of quantity decisions; (iv) the blockchain-driven SCF mode is more efficient for supply chains which are less capital-constrained. This article provides a decision basis for the selection of supply chain financing channels and provides an idea for future research on blockchain-driven SCF.

A Stepwise Replicable Approach to Negotiating Value-driven Supply Chain Contracts for Orthobiologics.

Orthobiologics are increasingly used to augment healing of tissues. Despite growing demand for orthobiologic products, many health systems do not enjoy substantial savings expected with high-volume purchases. The primary goal of this study was to evaluate an institutional program designed to (1) prioritize high-value orthobiologics and (2) incentivize vendor participation in value-driven contractual programs. A three-step approach was used to reduce costs through optimization of orthobiologics supply chain. First, surgeons with orthobiologics expertise were engaged in key supply chain purchasing decisions. Second, eight orthobiologics formulary categories were defined. Capitated pricing expectations were established for each product category. Capitated pricing expectations were established for each product using institutional invoice data and market pricing data. In comparison with similar institutions, products offered by multiple vendors were priced at a lower benchmark (10th percentile of market price) than more rare products priced at the 25th percentile of the market price. Pricing expectations were transparent to vendors. Third, a competitive bidding process required vendors to submit pricing proposals for products. Clinicians and supply chain leaders jointly awarded contracts to vendors that met pricing expectations. Compared with our projected estimate of $423,946 savings using capitated product prices, our actual annual savings was $542,216. Seventy-nine percent of savings came from allograft products. Although the number of total vendors decreased from 14 to 11, each of the nine returning vendors received a larger, three-year institutional contract. Average pricing decreased across seven of the eight formulary categories. This study demonstrates a three-step replicable approach to increase institutional savings for orthobiologic products, engaging clinician experts, and strengthening relationships with select vendors. Vendor consolidation permits a symbiotic win-win relationship: Health systems achieve increased value by reducing unnecessary complexity of multiple contracts, and vendors obtain larger contracts with increased market share. Level IV study.

Machine learning-based technique for predicting vendor incoterm (contract) in global omnichannel pharmaceutical supply chain

The importance of supply chain management to business operations and social growth cannot be overstated. Modern supply chains are considerably dissimilar from those of only a few years ago and are still evolving in a vastly competitive environment. Technology dealing with the rising complexity of dynamic supply chain processes is required. Robotics, machine learning, and rapid information dispensation can be supply chain transformation enablers. Quite a few functional supply chain applications based on Machine Learning (ML) have appeared in recent years; however, there has been minimal research on applications of data-driven techniques in pharmaceutical supply chains. This paper proposes a machine learning-based vendor incoterm (contract) selection model for direct drop-shipping in a global omnichannel pharmaceutical supply chain. The study also highlights the critical factors influencing the decision to select a vendor incoterm during the shipment of pharmaceutical goods. The findings of this study show that the proposed model can accurately predict a vendor incoterm (contract) for given values of input parameters. This comprehensive model will enable researchers and business administrators to undertake innovation initiatives better and redirect the resources regarding the direct drop shipping of pharmaceutical products.

Uncertain retailer-led supply chain contract design under asymmetric delivery reliability information: sequential ordering and pricing decisions

Uncertain retailer-led supply chain contract design under asymmetric delivery reliability information: sequential ordering and pricing decisions

Is There Any Pattern Regarding the Vulnerability of Smart Contracts in the Food Supply Chain to a Stressed Event? A Quantile Connectedness Investigation

Blockchain can support the food supply chain in several aspects. Particularly, food traceability and trading across pre-existing contracts can make the supply chain fast, error-free, and support in detecting potential fraud. A proper algorithm, keeping in mind specific geographic, demographic, and additional essential parameters, would let the automated market maker (AMM) supply ample liquidity to pre-determined orders. AMMs are usually run by a set of sequential algorithms called a ‘smart contract’ (SM). Appropriate use of SM reduces food waste, contamination, extra or no delivery in due course, and, possibly most significantly, increases traceability. However, SM has definite vulnerabilities, making it less adaptable at times. We are investigating whether they are genuinely vulnerable during stressful periods or not. We considered seven SM platforms, namely, Fabric, Ethereum (ETH), Waves, NEM (XEM), Tezos (XTZ), Algorand (ALGO), and Stellar (XLM), as the proxies for food supply-chain-based smart contracts from 29 August 2021 to 5 October 2022. This period coincides with three stressed events: Delta (Covid II), Omicron (Covid III), and the Russian invasion of Ukraine. We found strong traces of risk transmission, comovement, and interdependence of SM return among the diversified SMs; however, the SMs focused on the food supply chain ended up as net receivers of shocks at both of the extreme tails. All these SMs share a stronger connection in both positive shocks (bullish) and negative shocks (bearish).

ОЦЕНКА ГИБКОСТИ В ПРОИЗВОДСТВЕННЫХ ЦЕПОЧКАХ ПОСТАВОК

The purpose of this article is to propose a framework for assessing the agile of manufacturing companies. Three supply chain logistics factors (capacity, transportation, and stock) along with three cross-functional factors (information, suppliers, and pricing) are selected as core sets to classify all required agility actions. In addition, supply chain contracts, as an important indicator of supply chain agile, are also considered for activity classification. These activities are ranked using the Hierarchy Analysis method and then classified according to the main agility factors. Using a cyclic approach to the supply chain, the developed activities are classified as the main strategies of the supply chain links.

Retailer's channel policy and two-part tariff contract in green supply chain: An optimization analysis considering channel purchasing cost

<p style='text-indent:20px;'>In launching new green product or responding to market environment change, supply chain firms need to pour attention to best retailer's channel structure policy and coordination conditions. We consider a retailer-led green supply chain, and investigate optimal retailer's channel structure policy and supply chain coordination considering the impact of channel purchasing cost. First, we analyze three potential channel structures of green supply chain: offline channel structure (F), online channel structure (N), and dual-channel structure (D), and provide three functions to describe market demands for potential channel structures by analyzing the impacts of price, channel purchasing cost, and product greening level. Then, we develop profit functions and construct three joint pricing and product greening level optimization models to determine optimal joint optimization policies for structures F, N, and D, respectively. Furthermore, we conduct the theoretical analysis of retailer's channel structure selection, and provide numerical studies to illustrate and testify the theoretical results. Finally, we use a two-part tariff (TPT) contract to realize green supply chain coordination for structures F, N, and D, and show coordination conditions. Our research results indicate that, the optimal retailer's channel structure from each perspective is generally not uniquely determined, and optimal retailer's channel structures from three perspectives of manufacturer, retailer, and supply chain can be affected by channel purchasing cost, greening cost sensitivity, and preference degree of consumer to online channel.</p>

Managing Emergency Procurement Using Option Contract under Supply Disruption and Demand Uncertainty

Effective and flexible procurement and production strategies are capable of alleviating and mitigating supply disruption and demand risk. Considering the price fluctuation caused by environmental change, we investigate the optimal procurement and production strategies under supply disruption and demand uncertainty based on option contract in a two‐stage supply chain consisting of a retailer who has two procurement opportunities and a supplier who has the emergency production chance. We explore the value of option contract by comparing it with the optimal decision making under no option contract. The result shows that option ordering and emergency procurement can coordinate the optimal strategies under uncertain environment, improving the economic performance of whole supply chain. When the disruption probability is high or the price of emergency procurement is lower, the higher option price can stimulate the supplier to produce more products to satisfy the retailer’s emergency order at a low price, which is beneficial to both, and the value of option ordering is greater. Otherwise, the emergency procurement is worth more for the core enterprise. The moderate exercise price is conducive to the long‐term cooperation of the supplier and the retailer.

Automating Supply Chain Contracts in the Presence of Demand Shifts and Contract Execution Lag

Automating Supply Chain Contracts in the Presence of Demand Shifts and Contract Execution Lag

Supply chain optimization considering consumers’ mental accounting by time dimension in advance selling

Advance selling activities based on e-commerce platforms have received much attention from consumers, which is a two-stage sales mode. However, many consumers have indicated that they are relatively happy to pay a deposit and feel more burdened at the final payment stage. That is, consumers feel differently at the two moments even though they know they will pay the same total amount for the product. This psychological behavior can be explained by mental accounting, which means the cognitive-computational process by which individuals or households code, evaluate, and record financial behavior. With the use of advance selling, this research has developed a game theoretical model to investigate how consumers’ mental accounting affects the optimal pricing and ordering decisions of supply chain members under wholesale price and revenue sharing contracts. The analysis shows that under wholesale price contracts, regardless of the optimal wholesale price set by the supplier, a portion of consumers will forgo the deposit paid, and the optimal order quantity for the retailer will always be equal to the consumers’ demand at the final payment stage. In exceptional cases, the optimal wholesale price may be equivalent to the retail price. The supplier’s optimal wholesale price increases monotonically with the consumer’s time coefficient for the price and decreases monotonically with the consumer’s time coefficient for product valuation. Furthermore, under a revenue sharing contract, there is a situation where the supplier’s optimal wholesale price is equal to cost. Additionally, a supplier’s optimal wholesale price exists such that none of the consumers will forgo the deposit they have paid. The study contributes to the understanding of mental accounting in advance selling and has implications for supply chain contract design.

A novel system for medical equipment supply chain traceability based on alliance chain and attribute and role access control

With the increasing sales of the medical device market, the medical incidents caused by passive medical devices are increasing, which needs to be solved from the medical device supply chain. In addition, there are complex rights retrieval and assignment problems in the medical device supply chain system, and the traditional Role-based Access Control (RBAC) model is no longer suitable for the actual application environment of the supply chain.This article combines the traditional RBAC model and the Attribute-based Access Control (ABAC) model for access control management in the medical device supply chain to overcome the limitations abovementioned, taking advantage of the ABAC model’s flexibility to achieve granular and dynamic management of permissions, as also the RBAC model to simplify the permissions management of the entire system. Blockchain technology’s traceability, non-tampering, and decentralization features are essential to eliminate passive and inferior medical equipment sales activities, solving the problem of mutual mistrust and ‘Information Silo’ between the two sides of medical device transactions. The access control model is implemented in the blockchain’s smart contract, providing granular and dynamic authority management for the medical equipment supply chain and guaranteeing the security and privacy of medical device information in the supply chain. Three smart contracts on Hyperledger Fabric are designed for device management information, storage of implemented access control models, and implementation of access control policies. Experimental results show that the entire system is stable, ensuring high throughput and high security and promising.

Collaborative adoption of blockchain technology: A supply chain contract perspective

The outbreak of COVID-19 has significantly affected the development of enterprises. In the post-pandemic era, blockchain technology has become one of the important technologies to help enterprises quickly gain market competitiveness. The heavy investment required of supply chain stakeholders to employ blockchain technology has hindered its adoption and application. To tackle this issue, this study aims to facilitate the adoption of blockchain technology in a supply chain consisting of a core enterprise and a small/medium-sized enterprise through an effective supply chain contract. We analyze the performance of a cost-sharing (CS) contract and a revenue-sharing (RS) contract and propose a new hybrid CS-RS contract for better performance. We conduct comparative analyses of the three contracts and find that the hybrid CS-RS contract can more effectively incentivize both parties to reach the highest level of blockchain technology adoption and achieve supply chain coordination.

Efficient Supply Chain Contracting with Loss-averse Players in Presence of Multiple Plausible Breaches

The legal literature distinguishes between the liquidated damage and the penalty clauses in contracts, and holds that penalties designed for the prevention of breach are excessive compared to the liquidated damages. In an efficient supply chain contract, the penalty must satisfy the participation and incentive compatibility constraints of the signatories. Considering loss-averse players, we have calculated optimal penalties in a supply chain contract and compared those with the liquidated damages. Two possible breaches are considered – a breach in quality of the delivery and a breach in the process. In the absence of any penalty, a process breach reduces the supplier’s delivery risk and cost of delivery. Determining the parametric conditions for efficient contracts, numerically we show the effects of various variables on the zone of efficient contract. We show that the optimal penalties need not be excessive compared to the liquidated damages.

Revenue and cost sharing contract in a dynamic closed-loop supply chain with uncertain parameters

Revenue and cost sharing contract in a dynamic closed-loop supply chain with uncertain parameters

Construction of Equilibria in Strategic Stackelberg Games in Multi-Period Supply Chain Contracts

Almost every supplier faces uncertain and time-varying demand. E-commerce and online shopping have given suppliers unprecedented access to data on customers’ behavior, which sheds light on demand uncertainty. The main purpose of this research project is to provide an analytic tool for decentralized supply channel members to devise optimal long-term (multi-period) supply, pricing, and timing strategies while catering to stochastic demand in a diverse set of market scenarios. Despite its ubiquity in potential applications, the time-dependent channel optimization problem in its general form has received limited attention in the literature due to its complexity and the highly nested structure of its ensuing equilibrium problems. However, there are many scenarios where a single-period channel optimization solution may turn out to be myopic as it does not consider the after-effects of current pricing on future demand. To remedy this typical shortcoming, using general memory functions, we include the strategic customers’ cognitive bias toward pricing history in the supply channel equilibrium problem. In the form of two constructive theorems, we provide explicit solution algorithms for the ensuing Nash–Stackelberg equilibrium problems. In particular, we prove that our recursive solution algorithm can find equilibria in the multi-periodic variation of many standard supply channel contracts such as wholesale, buyback, and revenue-sharing contracts.