IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v160y2015icp94-105.html
   My bibliography  Save this article

Coordinating contracts for fresh product outsourcing logistics channels with power structures

Author

Listed:
  • Wu, Qing
  • Mu, Yinping
  • Feng, Yi

Abstract

We consider an outsourcing logistics channel where a distributor procures a quantity of a fresh product and outsources his logistics operations to a third party logistics service provider (TPLSP), whose logistics service quality and price affect the product sellable quantity and quality on the market, and the distributor׳s order decision, respectively. The distributor sets his order quantity and product selling price. The determinations of logistics service quality and price depend on the channel power structures. We investigate each firm׳s decisions under a traditional unit pricing contract in the three power balance scenarios where the distributor or the TPLSP has the channel power, or they have equal power. The equilibrium results show that the power structures have an important influence on contract design, each firm׳s decision behaviors and channel performances. We further develop two novel incentive mechanisms to coordinate the decentralized channel considering the risk preference of the TPLSP. Computational studies show that the power structures׳ influences increase while the effects of logistics service quality on product quantity and quality increase, and illustrate these incentive mechanisms can achieve full channel coordination and win–win outcomes.

Suggested Citation

  • Wu, Qing & Mu, Yinping & Feng, Yi, 2015. "Coordinating contracts for fresh product outsourcing logistics channels with power structures," International Journal of Production Economics, Elsevier, vol. 160(C), pages 94-105.
    • Handle: RePEc:eee:proeco:v:160:y:2015:i:c:p:94-105
    DOI: 10.1016/j.ijpe.2014.10.007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527314003211
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2014.10.007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nicholas C. Petruzzi & Maqbool Dada, 1999. "Pricing and the Newsvendor Problem: A Review with Extensions," Operations Research, INFORMS, vol. 47(2), pages 183-194, April.
    2. Arvind Rajan & Richard Rakesh, 1992. "Dynamic Pricing and Ordering Decisions by a Monopolist," Management Science, INFORMS, vol. 38(2), pages 240-262, February.
    3. Herbon, Avi & Levner, Eugene & Cheng, T.C.E., 2014. "Perishable inventory management with dynamic pricing using time–temperature indicators linked to automatic detecting devices," International Journal of Production Economics, Elsevier, vol. 147(PC), pages 605-613.
    4. Fernando Bernstein & Awi Federgruen, 2005. "Decentralized Supply Chains with Competing Retailers Under Demand Uncertainty," Management Science, INFORMS, vol. 51(1), pages 18-29, January.
    5. Giannoccaro, Ilaria & Pontrandolfo, Pierpaolo, 2004. "Supply chain coordination by revenue sharing contracts," International Journal of Production Economics, Elsevier, vol. 89(2), pages 131-139, May.
    6. Cai, Xiaoqiang & Chen, Jian & Xiao, Yongbo & Xu, Xiaolin & Yu, Gang, 2013. "Fresh-product supply chain management with logistics outsourcing," Omega, Elsevier, vol. 41(4), pages 752-765.
    7. 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.
    8. Yao, Z. & Leung, Stephen C.H. & Lai, K.K., 2008. "Manufacturer's revenue-sharing contract and retail competition," European Journal of Operational Research, Elsevier, vol. 186(2), pages 637-651, April.
    9. S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
    10. Osman Alp & Nesim K. Erkip & Refik Güllü, 2003. "Outsourcing Logistics: Designing Transportation Contracts Between a Manufacturer and a Transporter," Transportation Science, INFORMS, vol. 37(1), pages 23-39, February.
    11. Martin A. Lariviere, 2006. "A Note on Probability Distributions with Increasing Generalized Failure Rates," Operations Research, INFORMS, vol. 54(3), pages 602-604, June.
    12. 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.
    13. Marasco, Alessandra, 2008. "Third-party logistics: A literature review," International Journal of Production Economics, Elsevier, vol. 113(1), pages 127-147, May.
    14. Photis M Panayides & Meko So, 2005. "The Impact of Integrated Logistics Relationships on Third-Party Logistics Service Quality and Performance," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 7(1), pages 36-55, March.
    15. Terry A. Taylor, 2002. "Supply Chain Coordination Under Channel Rebates with Sales Effort Effects," Management Science, INFORMS, vol. 48(8), pages 992-1007, August.
    16. Lim, Wei Shi, 2000. "A lemons market? An incentive scheme to induce truth-telling in third party logistics providers," European Journal of Operational Research, Elsevier, vol. 125(3), pages 519-525, September.
    17. Chen, Frank Y. & Hum, S. H. & Sun, J., 2001. "Analysis of third-party warehousing contracts with commitments," European Journal of Operational Research, Elsevier, vol. 131(3), pages 603-610, June.
    18. Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
    19. Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Deng Jia & Chong Wang, 2022. "Option Contracts in Fresh Produce Supply Chain with Freshness-Keeping Effort," Mathematics, MDPI, vol. 10(8), pages 1-24, April.
    2. Huo, Baofeng & Fu, Dijia & Zhao, Xiande & Zhu, Jingwen, 2016. "Curbing opportunism in logistics outsourcing relationships: The role of relational norms and contract," International Journal of Production Economics, Elsevier, vol. 182(C), pages 293-303.
    3. Lianmin Zhang & Lei Guan & Yong-Hong Kuo & Houcai Shen, 2019. "Push or Pull? Perishable Products with Freshness-Keeping Effort," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 36(01), pages 1-29, February.
    4. Hongyan Wang & Min Huang & Hongfeng Wang, 2022. "Fourth-Party Logistics Environmental Compliance Management: Investment and Logistics Audit," Sustainability, MDPI, vol. 14(16), pages 1-20, August.
    5. Babaee, Sara & Araghi, Mojtaba & Rostami, Borzou, 2022. "Coordinating transportation and pricing policies for perishable products," Transportation Research Part B: Methodological, Elsevier, vol. 164(C), pages 105-125.
    6. Arkajyoti De & Surya Prakash Singh, 2022. "Analysis of Competitiveness in Agri-Supply Chain Logistics Outsourcing: A B2B Contractual Framework," Sustainability, MDPI, vol. 14(11), pages 1-33, June.
    7. Yu, Yunlong & Xiao, Tiaojun, 2021. "Analysis of cold-chain service outsourcing modes in a fresh agri-product supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 148(C).
    8. Nana Wan & Li Li & Xiaozhi Wu & Jianchang Fan, 2021. "Coordination of a fresh agricultural product supply chain with option contract under cost and loss disruptions," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-15, June.
    9. Yunlong Yu & Tiaojun Xiao & Zhangwei Feng, 2020. "Price and cold-chain service decisions versus integration in a fresh agri-product supply chain with competing retailers," Annals of Operations Research, Springer, vol. 287(1), pages 465-493, April.
    10. Qian Zheng & Manman Wang & Feng Yang, 2021. "Optimal Channel Strategy for a Fresh Produce E-Commerce Supply Chain," Sustainability, MDPI, vol. 13(11), pages 1-24, May.
    11. Yan Zhou & Cong Liang & Kar-Hung Wong, 2024. "The Optimal Logistics Distribution Service Strategy of the E-commerce Closed-Loop Supply Chain Network under Blockchain Technology and the Government Blockchain Subsidy," Sustainability, MDPI, vol. 16(15), pages 1-29, July.
    12. Fang Qiu & Qifan Hu & Bing Xu, 2020. "Fresh Agricultural Products Supply Chain Coordination and Volume Loss Reduction Based on Strategic Consumer," IJERPH, MDPI, vol. 17(21), pages 1-25, October.
    13. Sebatjane, Makoena & Adetunji, Olufemi, 2020. "A three-echelon supply chain for economic growing quantity model with price- and freshness-dependent demand: Pricing, ordering and shipment decisions," Operations Research Perspectives, Elsevier, vol. 7(C).
    14. Bo Yan & Jing Fan & Congyan Cai & Jing Fang, 2020. "Supply chain coordination of fresh Agri-products based on value loss," Operations Management Research, Springer, vol. 13(3), pages 185-196, December.
    15. Zhinan Li & Qinming Liu & Chunming Ye & Ming Dong & Yihan Zheng, 2022. "Achieving Resilience: Resilient Price and Quality Strategies of Fresh Food Dual-Channel Supply Chain Considering the Disruption," Sustainability, MDPI, vol. 14(11), pages 1-24, May.
    16. Liu, Chao & Lv, Jingyu & Hou, Ping & Lu, Danrong, 2023. "Disclosing products’ freshness level as a non-contractible quality: Optimal logistics service contracts in the fresh products supply chain," European Journal of Operational Research, Elsevier, vol. 307(3), pages 1085-1102.
    17. Xu, Yuqiu & Wang, Jia & Cao, Kaiying, 2023. "Logistics mode strategy of firms selling fresh products on e-commerce platforms with private brand introduction," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).
    18. Xiaoxu Chen & Peng Xu & Thomas Walker & Shengzhong Huang, 2019. "Pricing and Ordering Decisions in a Retailer Dominant Channel Involving a Third-Party Logistics Provider," Complexity, Hindawi, vol. 2019, pages 1-15, July.
    19. Stolze, Hannah J. & Brusco, Michael J. & Smith, Jeffery S., 2021. "Exploring the social mechanisms for variation reduction for direct store delivery (DSD) and vendor managed inventory performance: An integrated network governance and coordination theory perspective," International Journal of Production Economics, Elsevier, vol. 234(C).
    20. Yu Zhang & Nan Liu, 2021. "Optimal Internet of Things Technology Adoption Decisions and Pricing Strategies for High-Traceability Logistics Services," Sustainability, MDPI, vol. 13(19), pages 1-33, September.
    21. Yang, Lei & Tang, Ruihong, 2019. "Comparisons of sales modes for a fresh product supply chain with freshness-keeping effort," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 425-448.
    22. Huanyong Zhang & Huiyuan Xu & Xujin Pu, 2020. "Comparisons of Pre-Sale Strategies for a Fresh Agri-Product Supply Chain with Service Effort," Agriculture, MDPI, vol. 10(8), pages 1-20, August.
    23. Liu, Molin & Dan, Bin & Zhang, Shuguang & Ma, Songxuan, 2021. "Information sharing in an E-tailing supply chain for fresh produce with freshness-keeping effort and value-added service," European Journal of Operational Research, Elsevier, vol. 290(2), pages 572-584.
    24. Ma, Xueli & Wang, Jian & Bai, Qingguo & Wang, Shuyun, 2020. "Optimization of a three-echelon cold chain considering freshness-keeping efforts under cap-and-trade regulation in Industry 4.0," International Journal of Production Economics, Elsevier, vol. 220(C).
    25. Nafiseh Fallahi & Ashkan Hafezalkotob & Sadigh Raissi & Vahidreza Ghezavati, 2023. "Cooperation and coopetition among retailers-third party logistics providers alliances under different risk behaviors, uncertainty demand and environmental considerations," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(6), pages 5597-5633, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leng, Mingming & Zhu, An, 2009. "Side-payment contracts in two-person nonzero-sum supply chain games: Review, discussion and applications," European Journal of Operational Research, Elsevier, vol. 196(2), pages 600-618, July.
    2. Syed Asif Raza, 2022. "A bibliometric analysis of pricing models in supply chain," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(2), pages 228-251, April.
    3. Chen, Jing, 2011. "Returns with wholesale-price-discount contract in a newsvendor problem," International Journal of Production Economics, Elsevier, vol. 130(1), pages 104-111, March.
    4. Woonghee Tim Huh & Kun Soo Park, 2013. "Impact of transfer pricing methods for tax purposes on supply chain performance under demand uncertainty," Naval Research Logistics (NRL), John Wiley & Sons, vol. 60(4), pages 269-293, June.
    5. Xu, Xiaolin & Cai, Xiaoqiang & Chen, Youhua, 2011. "Unimodality of price-setting newsvendor's objective function with multiplicative demand and its applications," International Journal of Production Economics, Elsevier, vol. 133(2), pages 653-661, October.
    6. Adida, Elodie & Ratisoontorn, Nantaporn, 2011. "Consignment contracts with retail competition," European Journal of Operational Research, Elsevier, vol. 215(1), pages 136-148, November.
    7. Yunzeng Wang, 2006. "Joint Pricing-Production Decisions in Supply Chains of Complementary Products with Uncertain Demand," Operations Research, INFORMS, vol. 54(6), pages 1110-1127, December.
    8. Yaoguang Zhong & Fangfang Guo & Zhiqiang Wang & Huajun Tang, 2019. "Coordination Analysis of Revenue Sharing in E-Commerce Logistics Service Supply Chain With Cooperative Distribution," SAGE Open, , vol. 9(3), pages 21582440198, August.
    9. Daniel Granot & Shuya Yin, 2005. "On the effectiveness of returns policies in the price‐dependent newsvendor model," Naval Research Logistics (NRL), John Wiley & Sons, vol. 52(8), pages 765-779, December.
    10. Hu, Benyong & Meng, Chao & Xu, Dong & Son, Young-Jun, 2016. "Three-echelon supply chain coordination with a loss-averse retailer and revenue sharing contracts," International Journal of Production Economics, Elsevier, vol. 179(C), pages 192-202.
    11. Zhen-juan Xia & Yong Liu & Qi Zhang, 2022. "A dual supply chain revenue sharing contract considering online reviews and rebate," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(3), pages 321-331, June.
    12. Yuyue Song & Saibal Ray & Shanling Li, 2008. "Structural Properties of Buyback Contracts for Price-Setting Newsvendors," Manufacturing & Service Operations Management, INFORMS, vol. 10(1), pages 1-18, November.
    13. de Matta, Renato E. & Lowe, Timothy J. & Zhang, Dengfeng, 2014. "Consignment or wholesale: Retailer and supplier preferences and incentives for compromise," Omega, Elsevier, vol. 49(C), pages 93-106.
    14. Lin Jiang & Yong Wang & Xiaoming Yan & Wei Dai, 2014. "Coordinating a three-stage supply chain with competing manufacturers," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 22(1), pages 53-72, March.
    15. Xiang Fang & Jun Ru & Yunzeng Wang, 2021. "The Effect of List Price on Channel Performance with Consignment," Production and Operations Management, Production and Operations Management Society, vol. 30(1), pages 235-252, January.
    16. Zhisong Chen & Jianhui Peng, 2022. "Should the assembly system with direct omnichannel introduce integrated management service? A game-theoretical modelling study," Electronic Commerce Research, Springer, vol. 22(4), pages 1307-1350, December.
    17. Raza, Syed Asif, 2018. "Supply chain coordination under a revenue-sharing contract with corporate social responsibility and partial demand information," International Journal of Production Economics, Elsevier, vol. 205(C), pages 1-14.
    18. Granot, Daniel & Yin, Shuya, 2007. "On sequential commitment in the price-dependent newsvendor model," European Journal of Operational Research, Elsevier, vol. 177(2), pages 939-968, March.
    19. Wang, Feng & Diabat, Ali & Wu, Lunwen, 2021. "Supply chain coordination with competing suppliers under price-sensitive stochastic demand," International Journal of Production Economics, Elsevier, vol. 234(C).
    20. Yao, Z. & Leung, Stephen C.H. & Lai, K.K., 2008. "Manufacturer's revenue-sharing contract and retail competition," European Journal of Operational Research, Elsevier, vol. 186(2), pages 637-651, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:160:y:2015:i:c:p:94-105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.