Option contracts in fresh produce supply chain with circulation loss
Abstract: The purpose of this
paper is to investigate management decisions via option contracts in a
two-stage supply chain in which a fresh produce supplier sells to a retailer,
considering the circulation loss of the fresh produce.
Design/methodology/approach: Authors propose a Stackelberg model to
analyze the supply chain members’ decisions in the decentralized supply chain
compared with the integrated one under the newsvendor framework.
Findings: The results illustrate that there exists a unique optimal option
order quantity for the retailer and a unique optimal option order price for the
supplier giving certain conditions; furthermore, option contracts cannot
coordinate the fresh produce supply chain when the retailer only orders
options.
Originality/value: Agricultural products especially fresh produce’s
characteristics such as circulation loss and high risk are considered. Option
contracts and game theory are combined to manage the fresh produce supply
chain’s risk. The proposed tool and models are hoped to shed light to the
future works in the field of supply chain risk management.
Author: Chong Wang, Xu Chen
Journal Code: jptindustrigg130059
