Research on coordination of agricultural cooperatives and supermarkets supply chain based on option contract at the background of VMI model

Abstract

This paper introduces vendor managed inventory model into agricultural product supply chain which the agricultural cooperatives and supermarkets are directly connected with and achieves coordination by option contract. We find that the expected profit and the optimal order quantity of supply chain under decentralized decision-making situation are less than the levels of centralized decision-making situation and there’s double marginalization in this system. Our research demonstrates that option contract can coordinate the agricultural cooperatives and supermarkets and achieve a reasonable distribution of profits between them.