Supply chain coordination of fresh agricultural products based on consumer behavior

https://doi.org/10.1016/j.cor.2020.105038Get rights and content

Abstract

The circulation efficiency of the fresh agricultural product supply chain is greatly influenced by the purchasing power of end consumers. In this paper, a method to coordinate a fresh agricultural product supply chain with the consideration of strategic consumer behavior is proposed. First, considering the characteristics of the fresh agricultural products supply chain, the utility function of consumers is provided. Second, under the centralized chain, this study focuses on the impact of consumer behavior on supply chain decision-making, quantifies the strategic behavior of strategic consumers as a risk aversion coefficient, and analyzes the impact of consumer risk on supply chain decision-making. Third, two coordination contracts based on revenue sharing and wholesale price are designed for the decentralized decision making in fresh agricultural product supply chain. Finally, through numerical analysis, the sensitivity analysis of some key parameters in the model is carried out.

Introduction

Fresh agricultural products, including vegetables, fruits, meat, and aquatic products, are regarded as perishable due to their short lifecycle. The perishability of fresh agricultural products increases the difficulty of supply chain management of fresh agricultural products. Therefore, many researchers pay attention to fresh agricultural products supply chain management (Widodo et al., 2006, Ahumada and Villalobos, 2011, Rong et al., 2011, Agustina et al., 2014). Because of the difficulty of fresh agricultural product supply chain management, supply chain members are often in a decentralized decision-making state. In a decentralized chain, retailers make orders to maximize their own profits and thus fail to optimize the whole supply chain. To solve the problem of supply chain coordination, many scholars choose appropriate contracts to coordinate the fresh agricultural products supply chain. Cai et al. (2010) establish decision-making models for distributors to keep fresh products under the centralized and decentralized supply chains, and adopt an incentive mechanism to promote the coordination of the fresh agricultural product supply chain. In the context of e-commerce, Gu et al. (2018) analyze online retailers’ decision-making in terms of pricing, order quantity, and preservation efforts; and finally coordinated the fresh agricultural product supply chain through the revenue and cost sharing contract.
Different from previous studies, the current work focuses on consumer behavior and risk attitude in the fresh agricultural product supply chain. The existing literature on the fresh agricultural product supply chain lacks characterization of consumer behavior. According to the decision-making behaviors of consumers, Cachon and Swinney (2009) classify them into three categories: strategic, myopic, and bargain hunting, study the impact of different types of consumer behaviors on supply chain performance, and determine that the existence of strategic consumers lowers supply chain performance. In the fresh agricultural product supply chain, the strategic consumer behavior is related to the freshness of products. The freshness of agricultural products decreases with time. Consumers are no longer willing to buy stale agricultural products at the original price. Thus, retailers have to sell them at a reduced price. Retailers in the fresh agricultural product supply chain usually consider two or three price markdown periods. The strategic consumers consider their surplus from purchasing the product at full price and their surplus from purchasing the product on sale, and choose between the two to maximize their expected surplus (Cachon and Swinney, 2009). Therefore, if the decision-maker ignores the impact of strategic consumer behavior in the fresh agricultural product supply chain, the retailer’s decision-making will deviate from the reality, thereby resulting in considerable waste of fresh agricultural products and reduced profit. In the current work, we study the strategic consumer behavior in the fresh agricultural product supply chain, and consider the relationship between the strategic consumer behavior and the freshness of products. This topic has not been covered in previous studies.
In reality, because of the unreasonable decision-making of enterprises and the delayed purchase of strategic consumers, the price of fresh agricultural products in the supply chain must be lowered due to reduced freshness. The decrease of price affects the revenue of the whole supply chain. Therefore, it is necessary to clarify the impact of strategic consumer behavior on the fresh agricultural product supply chain. In addition, under the influence of consumer behavior, the appropriate contracts must be chosen to coordinate the whole supply chain. First, the purchase behavior of consumers in the fresh agricultural product supply chain is studied. Second, a revenue-sharing contract model of the fresh agricultural product supply chain is established based on the strategic purchasing behavior of strategic consumers. In addition, the optimal order quantity and pricing decision are obtained. Finally, the influence of the key parameters on decision variables is clarified through numerical analysis.
The rest of the paper is organized as follows. Section 2 reviews the literature. Section 3 analyzes the purchase behavior of strategic consumers in the fresh agricultural product supply chain. Section 4 proposes a decision-making model established on the basis of a two-period newsvendor model under the centralized and decentralized chains. Section 5 describes the numerical analysis to identify the influence of key parameters on decision variables. Section 6 concludes with a discussion.

Section snippets

Literature review

Our research relates to the literature on fresh agricultural products and strategic consumer behavior in operations management.
Fresh agricultural products are classified as perishable products. Hence, the research on fresh agricultural products begins with perishable products. As early as 1957, Whiti (1957) puts forward the concept of product deterioration management and integrate it into supply chain management, which lead to a discussion of the impact of product deterioration on supply chain

Model description and assumptions

Many scholars have applied the newsvendor model to the consumer behavior research (Dana and Petruzzi, 2001, Cachon and Swinney, 2011, Yin and Tang, 2014), because it can be used to determine the order quantity to maximize the expected revenue in a single cycle, and the probability distribution of demand. The newsvendor model usually has a long production cycle and a relatively short sales season, which is consistent with the characteristics of the fresh agricultural product supply chain studied

Fresh agricultural product supply chain under centralized decision

The expected sales revenue for period i is Siqi=qi-0qiFixidxi. Let’s consider the third period first. The leftover inventory at the end of the second period is defined as q3. we can express the expected profit of the supply chain in the third period asEπS3=sq3-0q3F3x3dx3
Let q2 represent the leftover inventory at the end of the first period, and let T=D2+D3 that obeys a normal distribution with distribution G· and density g·. Thus, Eq. (1) can be rewritten asEπS3=s0q2F2x2dx2-s0q2Gtdt
Moving

Numerical analysis

To improve the simulations, we refer to the relevant papers and set d1Ñ(1,0.2), d2~N0.4,0.15, d3~N0.2,0.1, θ1=0.95, ε=0.7, θ2=εθ1=0.665, θ3=ε2θ1=0.465, and a=200; thus, D1~N190,7220, D2~53.2,2653.35, and D3~N18.6,864,9. We can get D1+D2~N243.2,9873.35, D1+D2+D3~N261.8,10738.25. In addition, we set s=8, c=9, co=1, v=22, and k= 0.1 to conduct the numerical analysis.

Conclusions

This paper studies the impact of strategic consumer behavior on the fresh agriculture product supply chain. The fresh agricultural products usually experience several price cuts in their relatively short life cycles. In order to solve this problem, we develop a two-period newsvendor model considering the risk preference coefficient of consumers. The following conclusions can be drawn.
  • (1)
    The greater the risk aversion coefficient of strategic consumers, the lower the sales price, and the smaller the

Acknowledgments

This work was supported by National Natural Science Foundation of China (71871098), Humanities and Social Sciences Foundation of Ministry of Education of China (18YJA630127), Natural Science Foundation of Guangdong Province, China (2017A030313415), Soft Science Research Project of Guangdong Province, China (2019A101002119), and Fundamental Research Funds for the Central Universities of China (ZDPY201914).
Bo Yan is a professor in School of Economics and Commerce at the South China University of Technology, China, where he received his PhD in mechanical manufacturing and automation in 2003. He worked as a postdoctoral researcher at Department of Automation, Tsinghua University, from 2003 to 2005. His research interests include supply chain and logistics.

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    Bo Yan is a professor in School of Economics and Commerce at the South China University of Technology, China, where he received his PhD in mechanical manufacturing and automation in 2003. He worked as a postdoctoral researcher at Department of Automation, Tsinghua University, from 2003 to 2005. His research interests include supply chain and logistics.
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