Supply Chain Fair Profit Allocation Based on Risk and Value Added for Sugarcane Agro-industry

Abstract

Profit allocation is the main critical problem in the supply chain. In agro-industry supply chain, establishing a fair and reasonable profit allocation has been more challenging due to the influence of uncertain factors. Cooperative game theory with the Shapley value has an opportunity to solve this problem given its appropriateness for the key goals of the supply chain. Fuzzy Shapley value was developed to accommodate uncertain stakeholders' payoff. In addition, uncertain risk and value added were considered for a reasonable profit allocation. This model succeeded in a case study of finding a fair profit allocation in the sugarcane agro-industry supply chain taking into account uncertain risk and value added. The model validation showed that sugarcane farmers, mills, and distributors achieved 35.38%, 30.11%, and 34.51% of profit share, respectively. Stakeholders achieved their profit share based on their marginal contribution, risk potential, and value-added contribution, which may increase supply chain stability.