Profit-Sharing Contracts for Fresh Agricultural Products Supply Chain Considering Spatio-Temporal Costs

Abstract

This paper investigated the effects of the informational asymmetry phenomenon that occurs in the direct sale of fresh agricultural products (FAP) in an e-commerce environment. A three-level FAP supply chain was proposed, which was composed of a FAP supplier, a logistics service provider, and a large e-commerce platform. Considering the perishable nature of FAP, this paper analyzed the effects of logistics spatio-temporal costs and the freshness of FAP on the profit of each stakeholder in the supply chain. Three scenarios were considered: (1) complete information, (2) partial information, and (3) considering logistics spatio-temporal cost. Analytical models were developed based on the principal-agent theory and the supply chain coordination contract theory to depict the effects of a profit-sharing contract on the operations of the FAP supply chain. Modeling results indicated that under a complete information condition, an increase in the loss rate of FAP correlated to a decrease in the profit of the FAP supply chain. Under a partial information condition, considering the loss rate of FAP and the potential compensation costs to suppliers, when the loss rate of FAP was fixed, the profit of each stakeholder in the FAP supply chain displayed a decreasing trend in relation to compensation ratio. In comparison, when the compensation ratio was fixed, the total profit decreased as the freshness of the FAP degraded. To improve customer satisfaction, this paper recommends adding a front warehouse to improve the freshness of FAP. Although this option increases the logistics costs, it has the potential of increasing the overall profit of the FAP supply chain. Findings from this research have the potential to help the e-commerce platform with coordinating the various stakeholders on the supply chain to determine the optimal quality and quantity of FAPs, eventually improving the operational efficiency of the FAP direct sales supply chain by reducing the logistics costs of FAP.