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Coordinating contracts for fresh product outsourcing logistics channels with power structures

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  • 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.

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  • 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
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    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
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    13. 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.
    14. 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.
    15. 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).
    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. 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).
    19. 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.
    20. 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).
    21. 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.
    22. 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.
    23. 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.
    24. 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.
    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.

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