A study on contractual agreements in supply chains of agricultural produce

Yeu-Shiang Huang, Yung Chen Hsu, Chih Chiang Fang

Research output: Contribution to journalArticle

Abstract

Agricultural produce deteriorates in both quality and quantity over time, and how to determine appropriate operating and marketing strategies to reduce the loss from rottenness is essential in supply chains for such items. This study considers a two-echelon supply chain in which agricultural produce is provided by a grower to a wholesaler, and the harvest quantity for the grower may decrease due to unpredictable pest problems or weather factors. In addition, agricultural produce may be damaged during transportation and thus become inferior products with less value. The two different scenarios are considered in this study: with and without a contractual agreement, to develop the corresponding optimal pricing strategies for the grower and wholesaler. The results indicate that a contractual agreement by setting moderate ordering boundaries can achieve a win-win situation for both parties by mitigating the grower’s risk, since it can encourage the grower to plant more produce and thus ensure that the wholesaler can have enough produce to sell. Besides, in case that a low proportion of inferior products and a low discount rate can be managed, the use of contractual agreements would be beneficial for the grower. Moreover, the rise in the retailing prices of both the regular and inferior agricultural produce may collectively increase the total profit of the supply chain, but can actually hurt the wholesaler’s profit.

Original languageEnglish
Pages (from-to)3766-3783
Number of pages18
JournalInternational Journal of Production Research
Volume57
Issue number11
DOIs
Publication statusPublished - 2019 Jun 3

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Supply chains
Profitability
Marketing
Supply chain
Costs
Profit
Proportion
Discount rate
Retailing
Win-win
Pest
Scenarios
Weather
Factors
Marketing strategy
Pricing strategy
Harvest
Wholesalers
Optimal pricing

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

Cite this

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A study on contractual agreements in supply chains of agricultural produce. / Huang, Yeu-Shiang; Hsu, Yung Chen; Fang, Chih Chiang.

In: International Journal of Production Research, Vol. 57, No. 11, 03.06.2019, p. 3766-3783.

Research output: Contribution to journalArticle

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