Supply Chain Analysis of Contract Farming

• 成果类型: Article
• 署名作者: Federgruen, Awi; Lall, Upmanu; Serdar Simsek, A.
• 署名单位: Columbia University; Columbia University; Columbia University; University of Texas System; University of Texas Dallas
• 刊物名称: M&SOM-MANUFACTURING & SERVICE OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1523-4614
• DOI: 10.1287/msom.2018.0735
• 发表日期: 2019
• 页码: 361-378
• 关键词: Contract farming; food and water security; optimization under uncertainty; stochastic model applications; agriculture/food industry

摘要

Contract farming is a growing practice in developing countries and first-world economies alike. It generates necessary guarantees to sustain the continued operations of vulnerable farmers while enabling the manufacturers to manage the aggregate supply and price risk. We consider a single manufacturer who owns several manufacturing plants, each with a random demand for the crop. The manufacturer selects a set of farmers to offer a menu of contracts, which is exogenously specified or endogenously determined. Each selected farmer chooses a contract from this menu in advance of the growing season. After the growing season, under known demands and supplies, the manufacturer minimizes the distribution costs from the selected farmers to the production facilities. We formulate this problem as a Stackelberg game with asymmetric information, where the manufacturer is the leader and the farmers are the followers. The manufacturer's problem is a two-stage stochastic planning program for which we develop two solution approaches. We have applied our model to problem instances anchored on data from a large manufacturer of potato chips contracting with thousands of small farmers in India. We report on the performance of the solution methods compared with a lower bound based on the Lagrangean dual of the problem and show that the optimality gap is below 1%, for problem instances with 1,000 potential farmers. We also show how our model can be used to gain various managerial insights. As an example, when constructing the contract menu endogenously, often a small number of contract options suffices, depending on the degree of heterogeneity among the farmer pool. Thus, relatively simple menus often suffice.