Supply Chain Coordination Of Fresh Agricultural Products By Combined Contract

Improper freshness-keeping of fresh agricultural product in transit can accelerate loss and deterioration. So it is difficult for consumers to buy the high-quality fresh agricultural products. In the absence of appropriate incentives, logistics service providers are reluctant to improve the level of freshness-keeping effort. The supply chain of fresh agricultural products is composed of different economic entities, and they make decisions according to their own maximum profit. Every entity’s goal always conflicts with supply chain system, so it can cause multiple marginalization. In order to improve the overall performance of supply chain and level of freshness-keeping effort, it is necessary to set up a contract coordination mechanism for the supply chain of fresh agricultural products.Therefore, this paper considers the impact of freshness-keeping effort on demand. In the view of different providers of freshness-keeping effort in different logistics mode, we build three types of contracts to coordinate supply chain of logistics alliance, self-conducting logistics and third-party logistics. By discussing the benefit and decision scheme of supplier, retailer and logistics service provider, this paper studies the relation of decision-making in the centralized system and decentralized system. Because only wholesale price contract or option contract cannot coordinate supply chain, it sets up the combined contract model based on option contract and freshness-keeping cost sharing contract. Under the background of combined contract, it discusses the freshness-keeping effort and order quantity. On the premise of profit maximization of the whole supply chain, it addresses the conditions which the contract parameters should meet. By simulation example, it analyses the differences between combined contract, wholesale price contract and option contract. Furthermore, this proves the practical significance of combined contract. By numerical solution, it analyses the sensitivity of contract parameters and the effect of variables on profits of contract parties.This paper provides the extension of basic contract model. The participants of supply chain of fresh agricultural products can determine the optimal order quantity and the level of freshness-keeping effort. Furthermore, it makes the whole supply chain and the decision-making parties achieve higher benefits. Thus, it not only consolidates the cooperative relation between the retailer and supplier but also helps logistics service provider to determine more efficient freshness-keeping effort.