Skip to main content
SpringerLink
Log in

Quality Improvement through Contract Design and Competition in Agricultural Suppply Chains

  • Published:
Journal of Systems Science and Systems Engineering Aims and scope Submit manuscript

Abstract

Quality emerges as a pivotal competitive factor for agricultural products. Recently, retailers within agricultural supply chains have begun investing in technologies to improve quality and designing contracts to incentivize farmers to enhance their labor inputs. The farmers and the retailers incur different quality investment costs, with this cost increasing in the quality they provide. Simultaneously, retailers have embraced the farmer-competition strategy, employing competition to stimulate improved agricultural product quality among farmers. We construct a Stackelberg game model to analyze how farmers’ quality investment, retailer’s contract design, and profits are affected by the retailer’s farmer-competition strategy. We show that the farmer competition introduced by the retailer is not always effective in improving the farmer’s quality investment. Similarly, the competition cannot always lead to additional profits for the retailer. Moreover, the supply chain profit suffers from the retailer’s farmer-competition strategy when the competition intensity between farmers is relatively large. Our results offer insights for retailers by identifying how should the retailer design the contract to improve the farmer’s quality effort given the existence of the farmer competition and under what conditions the retailer should adopt the farmer-competition strategy.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Data Availability

Data sharing not applicable to this article as no datasets were generated or analysed during the current study.

References

  • Avinadav T, Chernonog T, Fruchter G E, Prasad A (2020). Contract design when quality is co-created in a supply chain. European Journal of Operational Research 286(3): 908–918.

    Article  MathSciNet  Google Scholar 

  • Ayvaz-Çavdaroǧlu N, Kazaz B, Webster S (2021). Incentivizing farmers to invest in quality through quality-based payment. Production and Operations Management 30(10): 3812–3830.

    Article  Google Scholar 

  • Balachandran K R, Radhakrishnan S (2005). Quality implications of warranties in a supply chain. Management Science 51(8): 1266–1277.

    Article  Google Scholar 

  • Benjaafar S, Elahi E, Donohue K L (2007). Outsourcing via service competition. Management Science 53(2): 241–259.

    Article  Google Scholar 

  • Bold T, Kaizzi K C, Svensson J, Yanagizawa-Drott, D (2017). Lemon technologies and adoption: Measurement, theory and evidence from agricultural markets in Uganda. The Quarterly Journal of Economics 132(3): 1055–1100.

    Article  Google Scholar 

  • Cachon G P, Zhang F (2006). Procuring fast delivery: Sole sourcing with information asymmetry. Management Science 52(6): 881–896.

    Article  Google Scholar 

  • Cachon G P, Zhang F (2007). Obtaining fast service in a queueing system via performance-based allocation of demand. Management Science 53(3): 408–420.

    Article  Google Scholar 

  • Chao G H, Iravani S M, Savaskan R C (2009). Quality improvement incentives and product recall cost sharing contracts. The Quarterly Journal of Economics 55(7): 1122–1138.

    Google Scholar 

  • Chen J, Chen Y J (2021). The impact of contract farming on agricultural product supply in developing economies. Production and Operations Management 30(8): 2395–2419.

    Article  Google Scholar 

  • Chen Y J, Tang C S (2015). The economic value of market information for farmers in developing economies. Production and Operations Management 24(9): 1441–1452.

    Article  Google Scholar 

  • Chopra S, Sodhi MS (2004) Managing risk to avoid supply-chain breakdowns. MIT Sloan Management Review 46(1): 53–62.

    Google Scholar 

  • de Zegher J F, Iancu D A, Lee H L (2019). Designing contracts and sourcing channels to create shared value. Manufacturing & Service Operations Management 21(2): 271–289.

    Article  Google Scholar 

  • Deng S J, Elmaghraby W (2005). Supplier selection via tournaments. Production and Operations Management 14(2): 252–267.

    Article  Google Scholar 

  • Dong, Y, Xu K, Xu Y, Wan X (2016). Quality management in multi-level supply chains with outsourced manufacturing. Production and Operations Management 25(2): 290–305.

    Article  Google Scholar 

  • Draaiyer J, Dugdill B, Bennett A, Mounsey J (2009). Milk testing and payment systems. A practical guide to assist milk producer groups. Food and Agriculture Organization of the United Nations, Rome.

    Google Scholar 

  • El Ouardighi F, Kogan K (2013). Dynamic conformance and design quality in a supply chain: An assessment of contracts’ coordinating power. Annals of Operations Research 211: 137–166.

    Article  MathSciNet  Google Scholar 

  • Farlow D, Schmidt G, Tsay A (1996). Supplier management at Sun Microsystems. Stanford Business School Case, Stanford University.

  • Hsu V N, Lai G, Liang G (2019). Agricultural partnership for dairy farming. Production and Operations Management 28(12): 3042–3059.

    Article  Google Scholar 

  • Jiang L, Wang Y (2010). Supplier competition in decentralized assembly systems with price-sensitive and uncertain demand. Manufacturing & Service Operations Management 12(1): 93–101.

    Article  Google Scholar 

  • Karaer ö, Kraft T, Khawam J (2017). Buyer and nonprofit levers to improve supplier environmental performance. Production and Operations Management 26(6): 1163–1190.

    Article  Google Scholar 

  • Levi R, Singhvi S, Zheng Y (2020). Economically motivated adulteration in farming supply chains. Management Science 66(1): 209–226.

    Article  Google Scholar 

  • Li C, Wan Z (2017). Supplier competition and cost improvement. Management Science 63(8): 2460–2477.

    Article  Google Scholar 

  • Mandal P, Jain T, Chakraborty A (2021). Quality collaboration contracts under product pricing strategies. Annals of Operations Research 302: 231–264.

    Article  MathSciNet  Google Scholar 

  • Mu L, Dawande M, Mookerjee V (2014). Improving the milk supply chain in developing countries: Analysis, insights, and recommendations. Production and Operations Management 23(7): 1098–1112.

    Article  Google Scholar 

  • Mu L, Dawande M, Geng X, Mookerjee V (2016). Milking the quality test: Improving the milk supply chain under competing collection intermediaries. Management Science 62(5): 1259–1277.

    Article  Google Scholar 

  • Niu B, Jin D, Pu X (2016). Coordination of channel members’ efforts and utilities in contract farming operations. European Journal of Operational Research 255(3): 869–883.

    Article  MathSciNet  Google Scholar 

  • özer ö, Raz G (2011). Supply chain sourcing under asymmetric information. Production and Operations Management 20(1): 92–115.

    Article  Google Scholar 

  • Qian X, Olsen T L (2022). Contractual coordination of agricultural marketing cooperatives with quality provisions. Manufacturing & Service Operations Management 24(6): 3269–3282.

    Article  Google Scholar 

  • Singh S (2009). Contract farming for agricultural development. Working Paper. Available at http://www.india-seminar.com/2009/595/595_sukhpal_singh.htm.

  • Tang C S, Sodhi M S, Formentini M (2016). An analysis of partially-guaranteed-price contracts between farmers and agri-food companies. European Journal of Operational Research 254(3): 1063–1073.

    Article  MathSciNet  Google Scholar 

  • Tang C S, Wang Y, Zhao M (2015). The implications of utilizing market information and adopting agricultural advice for farmers in developing economies. Production and Operations Management 24(8): 1197–1215.

    Article  Google Scholar 

  • Wens (2020). Wens company annual report. Available at https://www.wens.com.cn.

  • Zhu K, Zhang R Q, Tsung F (2007). Pushing quality improvement along supply chains. Management Science 53(3): 421–436.

    Article  Google Scholar 

Download references

Acknowledgments

This study was funded by National Natural Science Foundation of China under Grant Nos. 72192823 and 71821002. The authors thank Executive Editor Yongbo Xiao, and two anonymous reviewers.

Author information

Authors and Affiliations

  1. School of Management, Zhejiang University, Hangzhou, 310058, China

    Jinxin Yang & Weihua Zhou

  2. Alibaba Business School, Hangzhou Normal University, Hangzhou, 311121, China

    Dongmei Xue

Authors
  1. Jinxin Yang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Dongmei Xue
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Weihua Zhou
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Dongmei Xue.

Ethics declarations

Weihua Zhou is an editorial board member for the Journal of Systems Science and Systems Engineering and was not involved in the editorial review, or the decision to publish this article. All authors declare that there are no other competing interests.

Additional information

Jinxin Yang is a Ph.D. candidate in the School of Management at Zhejiang University. Her research interests include quality management, operations in agricultural supply chains, and on-demand economy.

Dongmei Xue is a lecturer at Alibaba Business School, Hangzhou Normal University. She received a Bachelor’s degree in logistic management in 2014 and a Ph.D. degree in management science and engineering from Zhejiang University in 2020. Her current research is focused on green supply chain management, online businesses operational management, and marketing-operations interface.

Weihua Zhou holds the esteemed Qiushi Distinguished Professorship and serves as the director of the International Research Center for Data Analysis and Management at the School of Management, Zhejiang University. He received his Bachelor’s and Master’s degrees from Zhejiang University in 1999 and 2002, respectively, and received his Ph.D. degree from Hong Kong University of Science and Technology in 2007. His research interests include logistics and supply chain management and supply chain finance. He has published peer-reviewed articles in highly ranked journals such as Management Science, Operations Research, Production and Operations Management, European Journal of Operational Research, Omega, International Journal of Production Economics, etc.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Yang, J., Xue, D. & Zhou, W. Quality Improvement through Contract Design and Competition in Agricultural Suppply Chains. J. Syst. Sci. Syst. Eng. (2024). https://doi.org/10.1007/s11518-024-5605-0

Download citation

  • Published:

  • DOI: https://doi.org/10.1007/s11518-024-5605-0

Keywords

Search

Navigation