Cost-sharing models for green product production and marketing in a food supply chain

DOIhttps://doi.org/10.1108/IMDS-05-2017-0181
Pages654-682
Publication Date14 May 2018
AuthorQinghua Zhu,Xiaoying Li,Senlin Zhao
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
Cost-sharing models for green
product production and marketing
in a food supply chain
Qinghua Zhu
Department of Operations Management, Shanghai Jiao Tong University,
Shanghai, China
Xiaoying Li
School of Business Management, Dalian University of Technology,
Dalian, China, and
Senlin Zhao
Shanghai Maritime University, Shanghai, China
Abstract
Purpose The purposeof this paper is to explore the coordination mechanism of cost sharingfor green food
productionand marketingbetween a food producerand a supplierwho both contributeto the sales of greenfood.
Design/methodology/approach Thispaper first develops demandfunctions for botha food supplier and a
producer,considering theirinfluence on green degreeof food and associated consumersacceptances.Then, cost-
sharingcontracts-based gamemodels are proposed.At last, regarding to optimalsupply chain profitsand green
performance,the proposed contractsand the non-coordinationsituation are comparedand tested by a real case.
Findings When green cost is only shared by one side, the cost-sharing contracts cannot optimally
coordinate the food supply chain, but it can improve profits for both the supplier and producer. When
consumerssensitivity to the green degree of food increases, a mutual cost-sharing contract will bring more
profits for both the supplier and producer than those under the non-coordination mode in a decentralized
supply chain situation. A real case verifies the conclusions.
Research limitations/implications The models are in complete information, and the market demand is
assumed to be linear to sales price. Mutual cost sharing is only for material processing and food production,
which can be extended to include sharing for sales cost. Coordination ideas on the proposed contracts
development and solutions for optimal decisions can be applied in the other industries.
Practical implications The study shows that coordination between a supplier and a producer is needed
to improve the food supply chains green performance.
Originality/value This paper first extends the existing profit functions by considering the green efforts
of both a supplier and a producer as well as their effects on green degree of products and consumers
acceptances to the green degree.
Keywords Food supply chain, Green supply chain, Coordination mechanism, Cost-sharing contract,
Green demand
Paper type Research paper
Nomenclature
c
s
unit cost for ordinary raw materials
processing by a supplier
kunit cost for green materials
processing
cunit cost for production and sales of
ordinary food products by a food
producer
vunit cost for green production by a
food producer
Dmarketing demand of green
products
αprimary demand of green products
βthe responsiveness coefficient of
marketing demand to its sale price
Industrial Management & Data
Systems
Vol. 118 No. 4, 2018
pp. 654-682
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-05-2017-0181
Received 9 May 2017
Revised 13 July 2017
21 August 2017
21 August 2017
Accepted 22 August 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
This work is supported by National Natural Science Foundation of China (Nos 71632007,71690241 and
71472021) and Liaoning Provincial Education Department Scientific Research Fund (No. w2015040).
654
IMDS
118,4
ϕconsumerssensitivity to green degree
of products (green product sensitivity)
γthe coefficient of g
1
, which denotes
contribution of g
1
to product overall
green degree (g)
μthe coefficient of g
2
, Which denotes
contribution of g
2
to product overall
green degree (g)
C
gs
unit green sale cost for increase
of green product sensitivity by
a food producer
ηthe increased rate of green product
sensitivity due to sale efforts by the
food producer
p
s
unit wholesale price of green
materials, which is a decision variable
by a supplier
punit sale price of green products,
which is a decision variable by
a food producer
g
1
green degree of materials, which also
reflects the level of efforts for green
materials processing
g
2
green production degree, which also
reflects the level of green production
efforts by a food producer
ggreen degree of products, determined
by contribution of both a food
producer and a supplier
wdifference between pand p
s
π
s
profit for the supplier (S)
π
P
profit for the food producer (P)
pC
Tprofit for the total (T) food
supply chain under a centralized
supply chain
pDPn
Toptimal profit for the total food
supply chain in the food producer
Stackelberg situation
pDPn
Poptimal profit for the food producer in
the foodproducer Stackelbergsituation
pDPn
Soptimal profit for the supplier in the
food producer Stackelberg situation
pDSn
Toptimal profit for the total food
supply chain in the supplier
Stackelberg situation
pDSn
Poptimal profit for the food producer
in the supplier Stackelberg situation
pDSn
soptimal profit for the supplier in the
supplier Stackelberg situation
pCPn
Toptimal profit for the total food
supply chain under green production
cost-sharing contract
pCPn
Poptimal profit for the food producer
under green production cost-sharing
contract
pCPn
Soptimal profit for the supplier under
green production cost-sharing
contract
pCSn
Toptimal profit for the total food
supply chain under green materials
processing cost-sharing contract
pCSn
Poptimal profit for the food producer
under green materials processing
cost-sharing contract
pCSn
Soptimal profit for the supplier under
green materials processing
cost-sharing contract
pPSn
Toptimal profit for the total food
supply chain under mutual green
cost-sharing contract
pPSn
Poptimal profit for the food producer
under mutual green cost-sharing
contract
pPSn
Soptimal profit for the supplier under
mutual green cost-sharing contract
1. Introduction
Food industry is an important part in the global economy (Ala-Harja and Helo, 2014), and it
is also a key industry that promotes pollution-free products (Wang et al., 2016; Pham et al.,
2015). However, in recent years, food hygiene and safety incidents have occurred frequently
all over the world, and their negative effects on food industry image have been recognized
by the public (Chen et al., 2015; Grekova et al., 2016). Meanwhile, on the market side,
increasing environmental awareness of consumers improves green product demand
(Laroche et al., 2001; Peterson and Michalek, 2013; Yalabik and Fairchild, 2011; Zhao et al.,
2016). Food choices also signify individualsbeliefs and some form of social identity
655
Green product
production and
marketing

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