Three - Level Supply Chain Coordination Of Fresh Agricultural Products Based On Auction Market

The "three agriculture-related issues" in China has always been the most important works of the Party and State. It is also the most critical problem in the area of people’s livelihood. Since 2004, twelve years’ Central NO.1 Documents in a row are focused on agriculture, rural area and farmer. From these documents, it can be seen that the core measure to solve is to improve the agricultural market system and agri-food price formation mechanism. The dissertation studies the supply coordination problems in the background of the non-integrated operation features in China’s Agricultural Industry Chain, the abnormal price fluctuation phenomenon of fresh agri-food, the urgently needs to improve the circulation of fresh agri-food, the auctions are becoming an important way to sell fresh agri-food, the need to conduct the coordinate research to the agri-food supply chain. We study the issue of coordination based on auction market using the methods of Mathematical Modeling, Mechanism Design and Supply Chain Coordination. Our research fingdings can help to improve fresh agri-food supply chain management and optimization. The dissertation also gives the ideas to perfect our country’s agri-food market system, and establish efficient, green and transparent markets trading mechanism.The structure of this dissertation is as follows:Firstly, we analyze the basic concepts, the research background, the theoretical basis of supply chain coordination and the present research results and contents. Secondly, we summarize and concludes the supply chain of fresh agri-food in the characters of the auction market, organization, structure, logistics, information structure and decision behavior. Then, based on the analysis of the three levels of supply chain, the three-level supply chain is divided into three types of two-level supply chain:farmers-auction farmers-buyers and auction-buyers. We also consider the situation when the monopoly in channels is applied to buyers and farmers and when more than on buyer is participating in the auction or when there are multiple products. Finally, the dissertation further studies the problem of the three-level supply chain coordination under the single chain structure of farmer, auction and buyer. By using the joint contract coordination mechanism, it could achieve the coordination of supply chain and the profits are arbitrarily divided to these three members. For the three-level supply chain structure of multi farmers and multiple buyers, we study the coordination problem in the situation of designed model.Through this dissertation, the followings are come to the conclusion:First, it is hard for fresh agri-food supply chain to attain the vertical integration in China, and there are still a lot of problems in price volatility, infrastructure construction, market circulation, information exchanging, fair and transparency. Non-auction channel is still in an absolutely dominated position in the trade process, and the poor information sharing and exchanging, price manipulating and low transaction efficiency are issues that all need to be solved. Adopting auction mechanism will help to solve the issues above, and Supply Chain Coordination will also help to improve the fresh agri-food market system, to achieve fair profit distribution, to benefit members in all levels, and to promote and perfect the Agricultural Industry.Second, the dissertation studies on literatures of supply chain coordination and supply chain coordination research which focused on perishable characteristic, demand uncertainty, fuzzy demand, multi-channel selection, risk attitude, asymmetric information and net structure. The study on three-level supply chain is significantly less than the study of two-level. And only small amount of the research is conduct combined with auction theory and supply chain coordination theory. The existing research is mainly focused on the auction mechanism itself as a coordinating mechanism for supply chain coordination. The dissertation will consider the auction mechanism as a trading way of supply chain. The auction market is also treated as an important member, which is more in line with the actual situation.Third, according to the existing alliance in supply chain and the different relationship of supply and demand, the study of the three-level supply chain coordination can adopt the progressive methods. The coordination in famers-auction two-level supply chain cannot be achieved when only a commission contract is applied. However, by adding extra coordination mechanism, the farmer and the auction market can work together to face the uncertainty of demand. When the auction is offering logistic service for the farmer and a contract of commission refunding is adopted, as long as the auction market can make the decision of commission and refunding rate at the same time, it is possible for the supply chain to achieve coordination. In the case when there is a non-auction channel and difference in cost, the fixed commission contract can achieve the coordination in a very specific situation. Fourth, when the trading price is determined by the auction price and the market demand, farmers-buyers two-level supply chain cannot be coordinated, which is due to the asymmetry of information between the two members. By introducing a new supply channel in the presence of farmer and buyer bilateral monopoly, the coordination of supply chain can be achieved. So it is not always the best choice to select the auction as the only trading way, an additional extra channel can help to improve the supply chain performance. Fifth, when there is only one fresh agri-food auctioned, by applying the auction mechanism, the fix commission contract is able to achieve supply chain coordination, but the coordination requires the auction market set a non-discrimination commission rate for all buyers. In the auction of multiple-items, when the auction market adopts a bid discount contract to encourage high-quality buyers to bid in accordance with the equilibrium auction bidding strategy rather than the expected transaction price, the coordination can be achieved. But in this case, the parameter of contract need to meet certain constrain. Sixth, when only charged with a fix commission, the single chain of farmers-auction market-buyers three-level supply chain cannot be coordinated because the equilibrium solution will make the whole supply chain profit to shared by the auction market. By introducing a joint contract of commission refunding and subsidy before auction, the supply chain coordination can be achieved, but the auction market will play a dominant position in profit distribution. When there is a channel selection for the farmer, the profit of farmer can be improved and the improved range will depend on the competitiveness of the auction channel and the non-auction channel. Seventh, when there are more than one farmer and buyer in the supply chain, the structure constitutes a net three-level supply chain. Both cases must be considered:when the total supply is less than the total demand and when the total supply is more than the total demand which corresponding to the two situation of single objective optimization in centralized decision. The optimized centralized decision-making needs to select the participating members of supply chain according to the different relationship between total supply and total demand. In the case of decentralized decision-making, it can be realized by the auction mechanism and the mechanism that the total supply can affect the dealing price. On the basis of the above member selection is achieving, and when assuming that all buyers needing to pay a fixed admission fees charged to select the buyers again and all buyers condemn to the supply cost and loss in a completely non-weighted allocation method, the supply chain can be coordinated with fix commission contracts. That is, after the process of excluding low-quality farmers and buyers, the auction mechanism is able to realized the optimal allocation of resources and product in supply chain.