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Optimization and Coordination of Fresh Product Supply Chains with Freshness‐Keeping Effort

Xiaoqiang Cai¹; Jian Chen²; Yongbo Xiao²; Xiaolin Xu³

¹ Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong · ² Research Center for Contemporary Management, Key Research Institute of Humanities and Social Sciences at Universities, School of Economics and Management, Tsinghua University, Beijing 100084, China · ³ School of Business, Nanjing University, Nanjing 210093, China;

We consider a supply chain in which a distributor procures from a producer a quantity of a fresh product, which has to undergo a long‐distance transportation to reach the target market. During the transportation process, the distributor has to make an appropriate effort to preserve the freshness of the product, and his success in this respect impacts on both the quality and quantity of the product delivered to the market. The distributor has to determine his order quantity, level of freshness‐keeping effort, and selling price, by taking into account the wholesale price of the producer, the cost of the freshness‐keeping effort, the likely spoilage of the product during transportation, and the possible demand for the product in the market. The producer, on the other hand, has to determine the wholesale price based on its effect on the order quantity of the distributor. We develop a model to study this problem, and characterize each party's optimal decisions in both decentralized and centralized systems. We further develop an incentive scheme to facilitate coordination between the two parties. Computational results are reported to show the effects of freshness‐keeping efforts.

DOI

10.1111/j.1937-5956.2009.01096.x

Volume

19 (3)

Pages

261-278

Language

en

Export

BibTeX

Sources

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