Optimal financing and operation strategy of fresh agricultural supply chain

Bo Yan, Gaodi Liu, Zhenyu Zhang and Chang Yan

Australian Journal of Agricultural and Resource Economics, 2020, vol. 64, issue 3, 776-794

Abstract: Increased market demand and expanded scales of production of fresh agricultural products by small and medium‐sized enterprises (SMEs) have highlighted the challenge of funding sufficient infrastructure. Additional costs to improve the freshness of produce makes the optimal financial and operational policies different for these enterprises. On the basis of the characteristics of the fresh agricultural supply chain, this paper analyses the financing strategies adopted by SMEs and obtains optimal operational and financing strategies for SMEs in six different situations. The analysis shows that the optimal level of financing by SMEs is not only affected by the financing rate, but also negatively related to the freshness effort cost coefficient, and is positively related to the sensitivity coefficient of market freshness. Moreover, although the cost of improving the freshness level of the producte is only borne by the SME, the supply chain cannot maximise profit from the optimal financial strategies of SMEs. Shouldering the fresh effort cost also lessens the optimal financing requirement of the SME compared with that of the entire supply chain. The difference is affected by the fresh effort cost coefficient.

Date: 2020
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