Fresh-product supply chain management with logistics outsourcing
We consider a supply chain in which a producer supplies a fresh product, through a third-party logistics (3PL) provider, to a distant market where a distributor purchases and sells it to end customers. The product is perishable, both the quantity and quality of which may deteriorate during the process of transportation. The market demand is random, sensitive to the selling price as well as the freshness of the product. We derive the optimal decisions for the three supply chain members, including the 3PL provider's transportation fee, the producer's shipping quantity and wholesale price, and the distributor's purchasing quantity and retail price. We find that the presence of the 3PL provider in the supply chain has a significant impact on its performance. We propose an incentive scheme to coordinate the supply chain. The scheme consists of two contracts, including a wholesale-market clearance (WMC) contract between the producer and the distributor, and a wholesale-price-discount sharing (WDS) contract between the producer and the 3PL provider. We show that the proposed contracts can eliminate the two sources of “double marginalization” that exist in the three-tier supply chain, and induce the three parties to act in a coordinated way.
Volume (Year): 41 (2013)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary D. Eppen & Ananth. V. Iyer, 1997. "Backup Agreements in Fashion Buying---The Value of Upstream Flexibility," Management Science, INFORMS, vol. 43(11), pages 1469-1484, November.
- repec:idb:brikps:publication-detail,7101.html?id=9301 is not listed on IDEAS
- Henry Vega, 2008. "The Transportation Costs of Fresh Flowers: A Comparison between Ecuador and Major Exporting Countries," IDB Publications (Working Papers) 9293, Inter-American Development Bank.
- Z. Kevin Weng, 1995. "Channel Coordination and Quantity Discounts," Management Science, INFORMS, vol. 41(9), pages 1509-1522, September.
- Harish Krishnan & Roman Kapuscinski & David A. Butz, 2004. "Coordinating Contracts for Decentralized Supply Chains with Retailer Promotional Effort," Management Science, INFORMS, vol. 50(1), pages 48-63, January.
- Wang, Xiaojun & Li, Dong, 2012. "A dynamic product quality evaluation based pricing model for perishable food supply chains," Omega, Elsevier, vol. 40(6), pages 906-917.
- Kopanos, Georgios M. & Puigjaner, Luis & Georgiadis, Michael C., 2012. "Simultaneous production and logistics operations planning in semicontinuous food industries," Omega, Elsevier, vol. 40(5), pages 634-650.
- Qing Li & Derek Atkins, 2002. "Coordinating Replenishment and Pricing in a Firm," Manufacturing & Service Operations Management, INFORMS, vol. 4(4), pages 241-257, May.
- Henry Vega, 2008. "Transportation Costs of Fresh Flowers: A Comparison across Major Exporting Countries," IDB Publications (Working Papers) 48178, Inter-American Development Bank.
- Goyal, S. K. & Giri, B. C., 2001. "Recent trends in modeling of deteriorating inventory," European Journal of Operational Research, Elsevier, vol. 134(1), pages 1-16, October.
- Fernando Bernstein & Awi Federgruen, 2005. "Decentralized Supply Chains with Competing Retailers Under Demand Uncertainty," Management Science, INFORMS, vol. 51(1), pages 18-29, January.
- Qinan Wang, 2001. "Coordinating Independent Buyers in a Distribution System to Increase a Vendor's Profits," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 337-348, May.
- Yunzeng Wang & Li Jiang & Zuo-Jun Shen, 2004. "Channel Performance Under Consignment Contract with Revenue Sharing," Management Science, INFORMS, vol. 50(1), pages 34-47, January.
- Ding, Ding & Chen, Jian, 2008. "Coordinating a three level supply chain with flexible return policies," Omega, Elsevier, vol. 36(5), pages 865-876, October.
- Arvind Rajan & Richard Rakesh, 1992. "Dynamic Pricing and Ordering Decisions by a Monopolist," Management Science, INFORMS, vol. 38(2), pages 240-262, February.
- Roeger, Edward & Leibtag, Ephraim S., 2011. "Produce Sourcing and Transportation Cost Effects on Wholesale Fresh Fruit and Vegetable Prices," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103696, Agricultural and Applied Economics Association.
- Tyan, Jonah C. & Wang, Fu-Kwun & Du, Timon C., 2003. "An evaluation of freight consolidation policies in global third party logistics," Omega, Elsevier, vol. 31(1), pages 55-62, February.
- Kathryn E. Stecke & Xuying Zhao, 2007. "Production and Transportation Integration for a Make-to-Order Manufacturing Company with a Commit-to-Delivery Business Mode," Manufacturing & Service Operations Management, INFORMS, vol. 9(2), pages 206-224, September.
- Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
- Choi, Tsan-Ming & Li, Duan & Yan, Houmin & Chiu, Chun-Hung, 2008. "Channel coordination in supply chains with agents having mean-variance objectives," Omega, Elsevier, vol. 36(4), pages 565-576, August.
- Kevin H. Shang & Jing-Sheng Song & Paul H. Zipkin, 2009. "Coordination Mechanisms in Decentralized Serial Inventory Systems with Batch Ordering," Management Science, INFORMS, vol. 55(4), pages 685-695, April.
When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:41:y:2013:i:4:p:752-765. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If references are entirely missing, you can add them using this form.