Contract coordination of new fresh produce three-layer supply chain

Publication Date04 Feb 2019
AuthorZilong Song,Shiwei He
SubjectInformation & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems
Contract coordination of
new fresh produce three-layer
supply chain
Zilong Song and Shiwei He
School of Traffic and Transportation, Beijing Jiaotong University, Beijing, China
Purpose There are particularly high fresh agricultural product (FAP) loss rates in actual supply chain
operation and the development of FAPs e-commerce is hindered to some extent. The purpose of this paper is
to achieve the coordination of three-layer FAP supply chain and maximize profit through the contracts among
the supply chain members.
Design/methodology/approach A three-layer FAP supply chain that consists of a fresh produce
e-commerce enterprise, third-party logistics service provider (TPLSP) and community convenience store
under e-commerce environment is considered. New game models are developed and optimal decisions in
centralized and decentralized channel are characterized. Different contract coordination mechanisms are
designed to improve the supply chain performance. Finally, computational studies are conducted.
Findings The decentralized supply chain cannot be coordinated by a freshness-keeping cost-sharing
contract, and it can be coordinated by a freshness-keeping cost-sharing and revenue-sharing contract. The
optimal unit online selling price, unit logistics distribution price, fresh-keeping effort and unit self-collection
service price can all be achieved.
Practical implications The paper provides a practical gui deline to managers in fresh produce industry
in terms of how to cooperat e with other supply chain members so as to maxi mize total profit and achieve
Pareto improvement wh ile also supply the fres hest and safest produce t o the target market unde r
e-commerce environment.
Originality/value Few studies have explored the coordination of three-layer FAP supply chain under
e-commerceenvironment with TPLSP and communityconvenience stores participationin decisions, especially
considering that the market demand for FAPs is affected by freshness and unit online selling price. In this
paper, all these scenarios are taken into account and corresponding mathematical models are developed.
In particular, different contract coordination mechanisms aredesigned and examined simultaneously.
Keywords Supply chain management, Third-party logistics, Fresh produce e-commerce enterprise,
Freshness-keeping effort, Perishable product
Paper type Research paper
unit online selling price of fresh
produce e-commerce enterprise
unit fresh produce cost of fresh
produce e-commerce enterprise
unit logistics distribution price of
unit logistics distribution cost of TPLSP
unit self-collection service price of
community convenience store
unit self-collection service cost of
community convenience store
Qonline ordering quantity of consumers
efreshness-keeping effort of TPLSP
sensitivity coefficient affecting
freshness level
amarket potential
bprice-elasticity of the demand function
λfreshness-keeping cost coefficient
δconsumerssensitivity to FAPs
θ(e)surviving function with respect to e
C(e)freshness-keeping cost function
Industrial Management & Data
Vol. 119 No. 1, 2019
pp. 148-169
© Emerald PublishingLimited
DOI 10.1108/IMDS-12-2017-0559
Received 5 December 2017
Revised 10 March 2018
18 April 2018
Accepted 8 May 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
This project was supported by the National Key R&D Program of China (Grant No. 2016YFE0201700);
National Natural Science Foundation of China (Grant No. 61374202); and Research Project of China
Railway Company (2017X004-D).
benefit-sharing proportion of TPLSP
benefit-sharing proportion of
community convenience store
cost-sharing coefficient of fresh
produce e-commerce enterprise
cost-sharing coefficient of community
convenience store
ηcost-sharing coefficient of TPLSP
expected profit of fresh produce
e-commerce enterprise
expected profit of TPLSP
expected profit of community
convenience store
total expected profit
1. Introduction
With the rapid development of social economy and the change of consumersconsumption
pattern, consumers demand for fresh agricultural products (FAPs) has been undergone a
transformation from quantity to quality. Safer and fresher FAPs have been paid more and
more attention to recently. There are some characteristics about FAPs, such as perishability,
freshness decreases with time, large market demand, so appropriate operation and
management in supply chain play an important role in ensuring their quality (Dan et al.,
2011; Zhang et al., 2017). In a traditional way, the FAPs were mainly transferred from the
large wholesale market, through small- and medium-sized food markets or supermarkets to
consumers. That means it has to undergo a long-distance transportation and many
intermediate links to reach the target market. The rapid development of FAPs e-commerce
makes it possible to transport FAPs directly from the original producing area to consumers.
However, in actual supply chain operations, there are many issues such as high loss rate of
FAPs, low preservation level of FAPs, high cost of cold chain distribution, which restrict the
development of FAPs e-commerce seriously and cause it to suffer substantial losses.
According to Cai et al. (2010) and Zheng et al. (2017), the loss rate of perishable products in
developed countries is up to 15 percent due to damage and spoilage, and it is much higher in
developing countries, reaching approximately 25 percent or 30 percent. There is as high as
$8.9bn loss of the supply chain of fruit and vegetables, representing about 30 percent of the
annual production in China (Yan et al., 2015).
The emergence of logistics distribution mode ( fresh produce e-commerce enterprise +
TPLSP +community convenience store) may help solve those problems to a certain extent.
In this mode, fresh produce e-commerce enterprise can deliver the FAPs of online shopping
to consumers by employing the specialized logistics service facilities and equipment of
third-party logistics service provider (TPLSP), and take community convenience store as a
temporary storage point, which reduces the high costs of a self-built cold chain logistics
system. The freshness-keeping effort of TPLSP (such as transportation time, shipping
temperature and protection material, etc.) may affect the FAPsfreshness, which may affect
consumersonline shopping satisfaction and second purchase intention and further
indirectly affect the profits of fresh produce e-commerce enterprise and community
convenience store. Therefore, it needs the three supply chain parties to work more closely
together to keep the freshness of FAPs. However, as an independent subject in the supply
chain, the fresh produce e-commerce enterprise, TPLSP and community convenience store
try to maximize their individual expected profits when they make decisions. As a result,
there is a double marginalization and the profit of the whole FAPssupply chain will lose a
lot. Therefore, to pay attention to the preservation of FAPs and the cooperation of supply
chain members, and to explore the operational strategies of FAPssupply chain
coordination to improve the operating performance of supply chain and the quality of
peoples life have important significance.
The purpose of the paper is to explore the coordination of three-layer FAPssupply chain
under the e-commerce environment with TPLSP and community convenience stores
participation in decisions. We will investigate optimal decisions of the three participants
supply chain

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