Fresh Product Supply Chain Coordination under CIF Business Model with Long Distance Transportation

This article focuses on the optimization and coordination of a fresh product supply chain under the CIF (Cost Insurance and Freight) business model with an uncertain long distance transportation. The following system is considered: A producer transports a certain amount of fresh products to a distant wholesale market, at which he sells them to a distributor. Because of the uncertain transportation delays, he faces the risk that the product might decay or deteriorate during the transportation process. The distributor procures the products at the wholesale market and sells them to a consumer-market that is sensitive to both the price and the freshness level of the product. The optimal initial quantity, the optimal wholesale price, and the optimal retailing price are studied under the assumption that both the decision makers are risk-neutral. On basis of the optimal solutions for the centralized system as a benchmark, a simple cost sharing mechanism is developed to coordinate the supply chain under consideration.