Coordination Of Supply Chain By Option Contract In Connecting Agricultural Cooperatives With Supermarkets Mode

Three rural issues: agriculture, rural areas and farmers in China are very important, affecting the national economy and people’s livelihood. In order to optimize the agricultural supply chain and to achieve sales of seamless,the mode which connected agricultural cooperatives and supermarkets directly is proposed. Each member has different interest and responsibility in this supply chain, which leads to the inconsistent between their local interests and the overall objectives of the supply chain. So there are some differences in the distribution of benefits and risk-taking that affect the operational efficiency of the mode. Therefore, we must strengthen mutual coordination between supply chain members. We use the option contract to coordinate the supply chain.Firstly, we summarize the researches of domestic and foreign scholars on the mode, option contract and vendor managed inventory theory, laying the foundation for later study.Secondly, we analysis the characteristics of two main operation patterns of this mode, and we find that these two patterns have different attraction to farmers under different conditions from the perspective of the farmers’ willingness to participate.Thirdly, we construct two-echelon supply chain and three-level supply chain respectively according to these two patterns. The study finds that overall expectation profit and optimal order volume under decentralized decision-making supply chain are less than the levels of centralized decision-making.So we use option contract to coordinate the two-echelon supply chain. And we formulate a secondary option contract to achieve coordination of the three-level supply chain. The option contract can coordinate the supply chain, achieving a reasonable distribution of profits between actors involved in supply chain, achieving a win-win situation on all sides.Finally, we choose a vegetable cooperative, named Zhongdeli from Zibo City of Shandong Province as the case, applying the theory to the actual operation, to provide some references for the implementation of the mode.