The Analysis of Profit Distribution under Yield Uncertainty for an Agriculture Supply Chain

In the two last decades, the analysis of the agriculture supply chain (ASC) has been paid attention by academics and practitioners. However, the issue of coordinating ASC is not considered so much where weak collaborations make lower profits and efficiencies. In this research, the distribution of profits and coordination of a three-level ASC including a gardener, a major buyer, and a retailer are investigated. The problem has been developed for both centralized and decentralized models. The optimal strategies of ASC are obtained for both models. In this study, the wholesale price contractual mechanism is investigated where the buyer’s and retailers’ wholesale price and the farm size are decision variables to find win-win situations under coordination. The proposed models were solved and sufficient propositions were developed. The numerical study is illustrated. The results show that with increasing farm area, the optimal harvest amount per unit area decreases for the centralized model. Furthermore, with increasing farm size, the gardener harvest amount per unit area and the supply amount increase where the retail selling price is almost constant for both cases. At the same level, with increasing farm size, the supply chain profit increases. In decentralized analysis with a wholesale price contract, the gardener’s harvest amount per unit area and the supply amount increase by increasing the gardener’s wholesale price. Moreover, by increasing the gardener’s wholesale price, its profit increases, and the profit of the buyer and the retailer decreases. For future studies, analyzing and comparing other coordinating contracts, such as revenue sharing and traditional ASCs contracts is proposed.