The Maize Supply Chain Coordination Mechanism under Yield Uncertainty Caused by Drought: A Study in the Heilongjiang Province of China

Abstract

Deficient rainfall due to drought is an inevitable factor triggering maize yield uncertainty, thus affecting the performance and sustainability of the supply chain. Therefore, this paper first uses historical data to quantitatively fit the unfavorable effect of rainfall on maize yield affected by drought, taking the maize planting in the Heilongjiang Province of China as an example. Then, using a Stackelberg game, payback revenue sharing (PBRS), and cost revenue sharing (CRS), contract mechanisms are developed to coordinate the maize supply chain incorporating yield uncertainty from drought and demand risk faced by the retailer. We investigate the impact of uncertain maize yield on the supply chain and conduct numerical experiments to verify the analysis. The results reveal that declining rainfall, representing increasing drought severity, negatively affects the profits of the entire supply chain and its members; however, supply chain efficiency is raised under both coordinated contracts. In addition, the yield risk-sharing proportion was higher under a CRS mechanism than a PBRS one, which gives more incentives for the vulnerable supplier to participate in the supply chain. Finally, our analysis indicates that rearranging contract structures and parameters based on classic revenue sharing contracts could realize supply chain coordination.