Input Quantity Decision and Coordination Mechanism with Two Production Chances and Yield Uncertainty

Conducting a second production run can improve the company’s capability of meeting the market demand. Few works examine optimal input quantity decisions under the mode with two production chances considering demand and yield uncertainty. We propose a vendor-managed inventory (VMI) supply chain with one supplier and one retailer. The supplier has two production chances and faces yield uncertainty in each production run. It is necessary for the supplier to make trade-offs between the cost and benefit of the second production run, then decide whether to conduct the second production run. We investigate the supplier’s optimal input quantity decision in each production run and obtain the supply chain members’ expected profits. As a comparison, the mode with one production chance is also developed. We find that two production chances can help improve the performance of the supply chain under yield uncertainty. A revenue-sharing contract is introduced to coordinate the supply chain with two production chances, and efficient profit allocation is achieved through adjusting the revenue-sharing ratio and the wholesale price. An extension is conducted for a sensitivity analysis of unit punishment cost on the supplier’s input quantity decisions.

Optimal Financing Decision in a Contract Food Supply Chain with Capital Constraint

To solve the financing problem of the food producers, we consider a two-echelon contract food supply chain composed of a family farm with capital constraints and a food processing enterprise. With no capital constraints as the benchmark model, we analyze optimal decisions of the family farm and the food processing enterprise in the case of bank financing with bank participation only and bank financing with “government, bank, and insurance” coparticipation. Then, we discuss how the risk of yield uncertainty influences the optimal decisions and profits of the family farm and the food processing enterprise under different financing situation. Meanwhile, the reason why the government subsidizes agriculture is explored, and the policy of minimum purchase price of the food is initiated when the market price is too low. Finally, the numerical examples and sensitivity analysis are presented. The results show that the bank financing with “government, bank, and insurance” coparticipation improves the welfare of supply chain members more obviously than the bank financing with bank participation only; when the rice price is too low, the policy of minimum purchase price of food is initiated, which increases the revenue and the growing enthusiasm of the family farm; the profits of the family farm and the food processing enterprise will decrease as the risk of yield uncertainty increases in the case of bank financing, and the risk of yield uncertainty will be reduced for the family farm when bank financing with “government, bank, and insurance” coparticipation.

A Simple Agro-Economic Model for Optimal Farm Nitrogen Application under Yield Uncertainty

Farmers in the developed world tend to over-apply fertilizer, and we explore a model for decision-making under uncertainty in yields. This article proposes an agro-economic model for farmer decision-making based on subjective expected yield and crop response to fertilization. The model explores subjective yield probability distributions that are both better suited to subjective crop yields than the previously proposed probability distribution and is easier to extract from farmers. The model allows the analysis of the impact of changes in fertilizer price and variance of expected yields. The model result is consistent with observed farmer behavior based on the rule of “fertilizing for the good years” that appears, according to our model, as rational and consistent with expected profit maximization under yield uncertainty since the cost of over-application is lower than that of the opportunity cost of under-application. The goal of increasing the efficiency of nitrogen use requires both technical innovation and an expansion of the knowledge on the socioeconomic factors underlying excessive crop fertilization that must be improved both to meet future food demands and to prevent environmental degradation and climate change.