Three-level supply chain coordination of fresh agricultural products in the Internet of Things

Pages1842-1865
Publication Date16 Oct 2017
DOIhttps://doi.org/10.1108/IMDS-06-2016-0245
AuthorBo Yan,Xiao-hua Wu,Bing Ye,Yong-wang Zhang
Three-level supply chain
coordination of fresh agricultural
products in the Internet of Things
Bo Yan, Xiao-hua Wu, Bing Ye and Yong-wang Zhang
School of Economics and Commerce, South China University of Technology,
Guangzhou, China
Abstract
Purpose The Internet of Things (IoT) is used in the fresh agricultural product (FAP) supply chain, which
can be coordinated through a revenue-sharing contract. The purpose of this paper is to make the three-level
supply chain coordinate in IoT by considering the influence of FAP on market demand and costs of
controlling freshness on the road.
Design/methodology/approach A three-level FAP supply chain that comprises a manufacturer,
distributor, and retailer in IoT is regarded as the research object. This study improves the revenue-sharing
contract, determines the optimal solution when the supply chain achieves maximum profit in three types of
decision-making situations, and develops the profit distribution model based on the improved revenue-
sharing contract to coordinate the supply chain.
Findings The improved revenue-sharing contract can coordinate the FAP supply chain that comprises a
manufacturer, distributor, and retailer in IoT, as well as benefit all enterprises in the supply chain.
Practical implications Resource utilizatio n rate can be improved afte r coordinating the ent ire
supply chain. Moreover, loss in the circulation process is reduced, and the circulation efficiency
of FAPs is improved becaus e of the application of Io T. The validity of the mod el is verified through a
case analysis.
Originality/value This study is different from other research in terms of the combination of supply chain
coordination, FAPs, and radio frequency identification application in IoT.
Keywords Internet of Things, Revenue-sharing contract, Fresh agricultural product,
Supply chain coordination
Paper type Research paper
Nomenclature
qOrder quantity of retailers
to distributors
w
1
Unit wholesale price of products
for the distributor
w
2
Unit wholesale price of products
for the manufacturer
pRetail prices
c
1
Marginal cost of order for
the retailer
c
2
Marginal cost of order for
the distributor
c
3
Marginal cost of order for
the manufacturer
c
4
Costs of IoT
c
5
Unit cost for the RFID tags
c
6
Unit maintenance cost for IoT
c
7
Cost of the IoT hardware,
middleware, and software
c
8
Other relevant cost (including
business processes, services
training, and education)
c(θ)Cost of freshness control
Industrial Management & Data
Systems
Vol. 117 No. 9, 2017
pp. 1842-1865
Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-06-2016-0245
Received 28 June 2016
Revised 11 September 2016
16 November 2016
27 February 2017
10 May 2017
Accepted 11 May 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
© Bo Yan, Xiao-hua Wu, Bing Ye and Yong-wang Zhang. Published by Emerald Publishing Limited.
This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may
reproduce, distribute, translate and create derivative works of this article (for both commercial &
non-commercial purposes), subject to full attribution to the original publication and authors. The full
terms of this licence may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
1842
IMDS
117,9
αc(θ) and
βc(θ) where
α+β¼1
Cost of freshness control shared
by the retailer and distributor,
where α+β¼1
ρTechnical complexity of the IoT
application (0, 1)
gRFID tag recycling rate
πTotal profits of the supply chain
φ
1
Revenue sharing rate for the
retailer (0, 1)
φ
2
Revenue sharing rate for the
distributor (0, 1)
1. Introduction
Fresh agricultural product (FAP) is a special type of perishable product that has a random
life cycle and with a demand that is affected by freshness. Approximately 500 million tons of
fresh fruits, vegetables, and nuts are produced annually and represent a large, important,
and expanding industry. Approximately 25-30 percent of the total production is discarded
after harvest because of problems during circulation (Donis-González et al., 2014).
Approximately 12 million tons of fruits and 13,000 tons of vegetables are wasted in China
annually; the postpartum loss rate of fruits and vegetables is as high as 25 percent and the
economic loss is over 15.4 billion dollars (Lin and Fan, 2014). The transport of FAPs faces
problems, such as large losses, low efficiency, and high cost. These issues have attracted
considerable attention from all sectors of society.
The FAP supply chain is different from the general supply chain with regard to the
freshness of agricultural products. With the reduction of freshness, although the product
has not been completely spoiled, its value and market demand will continue to decline.
The FAP supply chain considers the product freshness and proposes higher requirements
for the storage, transportation, processing, and other aspects of the product, compared with
the general supply chain. The research of radio frequency identification (RFID) in the field of
supply chain focuses on information sharing and product security; however, the influence
of freshness on the supply chain decision and the control of freshness in the actual
production are not considered. Moreover, mastering the real-time information change of
product freshness, the relationship between freshness control cost and freshness, and the
effect on the optimum freshness are ignored. These limitations lead to the inability of the
research results of the general supply chain to be directly applied to the FAP supply chain.
Therefore, this study introduces the concept of the Internet of Things (IoT); proposes high
requirements for the production, transportation, quality and safety management, and
traceability of FAPs; and explains the process of obtaining freshness information and
controlling freshness based on the operation mode of the three-level supply chain.
Furthermore, this study proposes the strategy of supply chain coordination under
the environment of the IoT, which is useful for the application of the IoT technology in the
supply chain management of FAPs. This strategy has theoretical and practical significance.
IoT can combine technologies, such as RFID, sensors, and the internet, to realize
intelligent identification and management, thereby providing significant opportunities in
developing the FAP supply chain (Hong et al., 2011). Gunasekaran et al. (2016) investigated
the effect of big data and predictive analytics assimilation on the supply chain and
organizational performance from the resource-based view. The characteristics of the FAP
supply chain in IoT include seamlessness between upstream and downstream enterprises in
the supply chain, information sharing, strong ability to resist risks, ideal supply
chain system, few redundant links in the supply chain, and high organization
(Verdouw et al., 2016). As a related technology of IoT, RFID may obtain and intelligently
control temperature and humidity during transport (Yan et al., 2015); this approach can
effectively reduce the FAP losses and is a key point for following and reviewing agricultural
products (Yu and Nagurney, 2012). Furthermore, IoT also connects devices with the internet
or sensor networks to achieve intelligent management, such as temperature and humidity
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Three-level
supply chain
coordination

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