Managing Food Safety with Pricing, Contracts and Coordination in Supply Chains

This study aims to design a safe and sustainable food supply chain with food safety mechanisms so that confidence-dependent demand can be positively affected by centralized, decentralized and combined supply chain contracts. To determine the optimal order quantity, buy-back price, rebate/penalty and sales target with the proposed framework, we derive the optimality conditions of corresponding models and use the results to analyze the lard oil supply chain. It is found that supply chain contracts together with the food safety mechanism can drastically improve food safety, consumer confidence and the resulting profits of a food supply chain. What differentiates our work from earlier research efforts is that only few studies have focused primarily on food safety mechanisms that embed a closed-loop supply chain to benefit all stakeholders of a supply chain and we attempt to bridge the gap. Further improvements can be developed based on the models developed in this study.