Research On Agricultural Supply Chain Coordination With Option Contracts Based On Farmer-Supermarket Direct Supply

In recent years, the supply chain of agricultural products is concerned by a lot of scholars. Agricultural reform also promote the industrialized operation of agriculture in China. Contract farming, which is made up of company and farmer, has gradually developed. This mechanism can solve the conflict of small product and large market, but the agricultural products circulation problems become increasingly apparent, and breach of faith also occurred. We need to set up a contract to let the supply chain more coordinated.In this paper, we first study the theories about supply chain coordination contract, then discussed the current situation of China's agricultural supply chain. In the case of the farmer-supermarket direct supply, market usually will sign the orders with farmer cooperatives a long time before the sale season. It will cause a high opportunity cost, and in the sale season, they will face the cost of disposal of surplus product, inventory cost and shortage cost. The option contract can bring supply flexibility to the supply chain, which is beneficial to the agricultural cooperatives and supermarkets, and can also improve the interests of the entire supply chain.Based on these theories, we establish the option contract model to coordinate the agricultural supply chain.In this paper, we establish an option contract model based on the newsvendor model to maximize profits of the overall supply chain of agricultural products. We discuss the best fixed purchases and the proper option purchases, then deeply analyze the impact of option price to supermarket and agricultural cooperatives and discuss how to set the option price to make the supply chain more effective.