Assessing the coordinated revenue-sharing contract of China’s farmer-supermarket direct-purchase model

Abstract

China began connecting farmers directly with supermarkets 10 years ago, when they were at a disadvantage and forced to sell products at low prices, as unstable cooperation among supply chain participants led to inequitable distribution of revenue. Revenue-sharing contracts offer a risk-sharing approach to ensure supply chain coordination and optimize profit for all. Research on short life cycle products with revenuesharing contracts assume stable prices or investigate the effects of revenue-sharing contracts on supply chain coordination. This study introduced a revenue-sharing contract model into a ‘farmer-supermarket directpurchase’ supply chain, considering price fluctuation and retail promotional efforts, stochastic market demand, among other factors. Revenue-sharing contracts achieved long-term stability in supply chain coordination, all participants obtained more profits, and the size of revenue-sharing parameter depends on the position and bargaining power of all participants. A case study on Tianhong supermarket and Nanxia farmer cooperative verified these findings, eliciting practical implications for professionals and policymakers.