Neural Computing and Applications (2020) 32:15357–15368

https://doi.org/10.1007/s00521-019-04125-9(0123456789().,-volV)(0123456789().
,- volV)

MULTI-ACCESS EDGE COMPUTING ENABLED INTERNET OF THINGS

Study on supply chain strategy based on cost income model

and multi-access edge computing under the background
of the Internet of Things
Lu Sun1 • Yuanjun Zhao2,3 • Wenqi Sun4 • Zhengkai Liu5,6

Received: 12 November 2018 / Accepted: 26 February 2019 / Published online: 13 March 2019
Ó Springer-Verlag London Ltd., part of Springer Nature 2019

Abstract
With the application of the Internet of Things, the cold-chain logistics efficiency of fresh agricultural product remarkably is
improved, but the operating costs inevitably rise. Thus, the main bodies of circulation at various levels need to decide
whether adopt the Internet of Things or not according to the cost–benefit situation. The significant boundary value closely
related to the revenue decision of cold-chain logistics of fresh agricultural product was figured out by particularly analyzing
the impact of the adoption of the Internet of Things on upstream and downstream wholesale prices, retail price, and order
quantity decision based on the costs and revenues of the upstream and downstream of the supply chain before and after the
adoption of the Internet of Things, and it was found that the overall profit boundary values of wholesaler, retailer, and
supply chain are the same; the increment of retail price and retailers’ revenues is larger than that of wholesalers’ revenues,
and the ascensional range of retail price is larger than that of wholesale price; the cost boundary value of order quantity in
supply chain has little to do with the quality of agricultural products, but is affected by the time of circulation, and
transportation and warehouse cost; the lower the cost of the Internet of Things is, the larger the impact on order quantity is.
The correctness of the research results was proved by means of illustrative example. This paper provides a scientific basis
for investment in the Internet of Things by enterprises engaged in cold-chain operation of fresh agricultural products.

Keywords Multi-access edge computing  Internet of Things  Fresh agricultural product  Cost effectiveness of cold-chain
logistics

& Yuanjun Zhao 3

Glorious Sun School of Business and Management, Donghua
1139089@mail.dhu.edu.cn University, Shanghai 200051, China
4
Lu Sun College of Economics and Management, Northeast
sunlu@xmut.edu.cn Agricultural University, Harbin 150040, China
5
Wenqi Sun College of Business, Southern Illinois University,
sunwenqi800@neau.edu.cn Carbondale 62901, USA
Zhengkai Liu 6
International College, Renmin University of China,
zhengkai.liu@siu.edu Suzhou 215123, Jiangsu, China
1
School of Cultural Industries and Tourism, Xiamen
University of Technology, Xiamen 361024, China
2
School of Business Administration, Shanghai Lixin
University of Accounting and Finance, Shanghai 201209,
China

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1 Introduction
Mobile edge computing (MEC) technology combines IT
service environment with cloud computing technology on
the edge of the network, improves the computing and
storage capacity of the edge network, reduces the delay of
network operation and service delivery, and improves the
quality of service experience of users. Therefore, MEC
technology has attracted wide attention and has been
incorporated into the 5G standard as a key technology [1]
(Fig. 1).
The development of cold-chain logistics of fresh agri-
cultural products in China badly lags behind [2]. According
to figures, about 400 million tons of fresh agricultural
products enter the field of circulation in China every year,
and about 90% meat, 80% aquatic products, and 95% fruits
and vegetables are transported and sold without cold chain
[3]. This results in large logistics loss of fresh agricultural
products. The logistics loss rate of meat is 12%, that of
aquatic products is 15%, and that of fruits and vegetables is
20–30% [4]. The annual amount of loss of fruits and
vegetables is as high as above 100 billion yuan. The high
rate of logistics loss aggravates the quality security hazard
of agricultural products and pushes up the prices of agri-
cultural products [5]. In developed countries like the UK,
USA, Japan, South Korea, and Singapore, cold-chain
logistics of fresh agricultural products cover over 95% of
Fig. 1 Applications of multi-access edge computing
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Neural Computing and Applications (2020) 32:15357–15368
the supply chain so that the rate of loss of agricultural
products can be controlled below 5% [6].
Although the quantity of refrigeration house and
refrigerator car has been growing rapidly in China at an
annual average growth rate higher than 30% in recent
years, and the level of refrigeration technique also has been
significantly improved, no complete cold-chain system that
can monitor the quality situation of agricultural products
from producing area to dining table is established yet, and
the Informationization degree of enterprises engaged in
cold-chain logistics is low [7]. Thus, it is difficult to realize
Informationization of the whole cold chain, and cold-chain
interruption happens frequently, which becomes the bot-
tleneck for the development of cold-chain logistics [8]. The
Internet of Things exactly is helpful to break through the
bottleneck in the cold-chain logistics process of fresh
agricultural products. The Internet of Things is helpful to
realize position trailing and source tracing of fresh agri-
cultural products, electronic operation in the links of
transportation, warehouse, circulation and processing, and
temperature and humidity monitoring throughout the cir-
culation process, enhance communication among the links
of cold-chain logistics, reduce information asymmetry,
raise cold-chain efficiency, and prevent cold-chain inter-
ruption [9]. The adoption of the Internet of Things is bound
to result in increase in operation cost. Thus, the main
bodies of circulation at various levels need to decide
Neural Computing and Applications (2020) 32:15357–15368
whether adopt the technology and the range of application
of the technology according to their budget cost [10].
Before cold-chain logistics system exerts a scale econo-
mies effect, enterprises’ input–output performance is dif-
ficult to reach an ideal condition, so there tends to lack the
motivation for cold-chain enterprises to apply the Internet
of Things [11]. Even though some enterprises apply the
Internet of Things, they will try to pass on the added cost to
consumers [12]. Finally, the purchase price of agricultural
products rises. Considering these problems above, this
paper covers cost, benefit, changing situation of wholesale
price, retail price and order quantity of upstream and
downstream of supply chain, and performance changes of
supply chain enterprises before and after the application of
the Internet of Things, with a view to provide an important
theoretical basis for investment decision making of enter-
prises of the Internet of Things. Bendaya et al. [9] dis-
cussed the development situation, problems, and
development tendency of cold-chain logistics of vegeta-
bles and aquatic products in China. Kortuem et al. [13]
emphasized that measures should be taken to improve the
standard, strengthen supervision, and upgrade and techni-
cally transform traditional refrigeration house for the
development of cold-chain logistics. Al-Fuqaha et al. [14]
discussed optimization of distribution routes of cold-chain
logistics by means of improving genetic algorithm. Huang
et al. [15] studied the coordinating function of benefit-
sharing contract in the three-level supply chain of fresh
agricultural products covering producer, distributor, and
retailer based on consideration of the impact of loss in
transportation process and freshness on demand. Kaur et al.
[16] discussed the effort level of preservation on earnings
of retailer and logistics provider and established a cost and
revenue sharing contract that can form an effective intrinsic
incentive mechanism, push logistics provider to raise the
effort level of preservation of fresh agricultural products,
and finally realize profit maximization of cold-chain
logistics system. Hamedani figured out the factors for
evaluating the quality of fresh agricultural products in cold
chain from the aspect of economic value with linear pro-
gramming method [17]. Batalla and Gonciarz [18] dis-
cussed the cold-chain logistics temperature control, cold-
chain performance optimization, and cold-chain transport
vehicles scheduling of fresh agricultural products by means
of mathematical analysis. Some researchers also took
notice of the application of the Internet of Things in cold-
chain logistics [19–22]. For example, Wit introduced
information acquisition technology of the Internet of
Things into the process of life cycle management of
products, built a PLM cost consumption model, and proved
that the introduction of information acquisition technology
of the Internet of Things is helpful for cost saving by means
of mathematical reasoning [23].
15359
To sum up, there are a lot of research achievements of
cold-chain logistics of agricultural products, and the
meaning of introducing the Internet of Things into cold-
chain logistics is recognized in some researches [24]. But
few researchers comprehensively compare the cost and
profit of adoption of the Internet of Things, which exactly
decides whether the main body of cold-chain logistics can
truly adopt the Internet of Things [25]. This paper, from the
aspect of cold-chain logistics, emphatically discusses that
the main body of supply chain dynamically adjusts
wholesale price, retail price, and optimal order quantity to
realize cost minimization based on consideration of the
perishability of fresh agricultural products and the change
of time of circulation and analyzing the cost and profit of
supply chain before and after the adoption of the Internet of
Things, to provide a basis for decision making on adoption
of the Internet of Things to cold-chain enterprises.
The contributions of the paper are as follows: (1) Studies
are made on the changes in wholesale price before and after
adopting the Internet of Things, to figure out the cost
boundary value allowing all main bodies of supply chain at
different levels to earn profit; (2) after adopting the Internet
of Things, the increment of retailer profit is larger than that
of wholesaler profit, and the growth rate of retail price is
larger than that of wholesale price; (3) the cost of adopting
the Internet of Things that decides order quantity in supply
chain has little to do with product quality, but is affected by
the time of circulation, and transportation and warehouse
costs.
The paper is divided into six parts: The first part is
introduction, the second part is problem description and
assumption, the third part is system model, the fourth part
is performance analysis, the fifth part is illustrative exam-
ple, and the sixth part is conclusion.
2 Problem description and assumption
For purpose of this paper, the one-way supply process from
producing area to wholesaler to retailer and finally to
consumers is mainly discussed. Before the sales season
approaches, retailer plans the order quantity q according to
the wholesale price w offered by wholesaler, and whole-
saler determines an optimal wholesale price and order
quantity with which cost minimization can be realized
based on retailer’s demand and in consideration of cost and
loss related to circulation throughout the whole supply
process. Retailer, after receiving agricultural products from
the wholesaler, determines the final retail price P based on
product quality and market demand and in consideration of
its own cold-chain logistics cost [26].
Specific description and assumed conditions are as
follows:
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1. Transportation cost. It is assumed that wholesaler bears
the transportation cost of cold-chain logistics a1 ðtÞ of the
link from producing area to wholesaler, and retailer
bears the transportation cost of cold-chain logistics a2 ðtÞ
of the link from wholesaler to retailer. The transportation
cost function should be positively correlated with the
drive distance in the process of circulation and trans-
portation. The longer the distance is, the longer the time
of circulation is, the larger the cold energy consumption
is, and the higher the cost is . If the time of circulation
exceeds a certain value, the cost of cold-chain trans-
portation will be excessively high, and cold-chain
transportation will be of no value. Thus, it is assumed
that the function is a cost function in which time is the
independent variable and T is the time limit value. Then,
the function has the following characteristics:
oa1 ðtÞ=ot  0, o2 a1 ðtÞ=ot2 [ 0, o2 a2 ðtÞ=ot2 [ 0,
0  t  T [27].
2. Cost depletions of agricultural products
1. In the circulation process of logistics supply chain at
normal temperature, fresh agricultural products are
liable to waste, and part of fresh agricultural products
also will rot in the case of long distance transportation
at low temperature via cold-chain logistics. If the life
cycle Y expires, all agricultural products will rot. To
facilitate research and analysis, a product preserva-
tion ratio function uðtÞð0  t  YÞ closely related to
the time of circulation was established to discuss the
change rule of the quantity of physical products. If
t ¼ Y, uðtÞ ¼ 0; if t ¼ 0, uðtÞ ¼ 1. During storage,
fresh agricultural products rot slowly at the beginning
and will rot at an increasing rate with the passage of
time. Considering this characteristic, ouðtÞ=ot 
0; o2 uðtÞ=ot2 \0 is satisfied. If the order quantity is
q, wholesale market, in order to predict the effective
value of order quantity excluding the loss, needs to
transport q=uðtÞ products [28].
2. Based on the knowledge of fresh agricultural products,
product quality declines as the time of circulation
increases due to bump, lack of water, locally rotting,
etc. Suppose product quality function is
cðtÞð0  t  YÞ, Y is life cycle of agricultural products.
If t ¼ Y, cðtÞ ¼ 0; if t ¼ 0, cðtÞ ¼ 1. Suppose the
quality function is a monotone continuous decreasing
function about circulation time t, and decreases
progressively at an increasing rate with the extension
of circulation time. The function has the characteristics
as below: ocðtÞ=ot  0; o2 cðtÞ=ot2 \0 [29].
3. Warehouse costs
Suppose the unit processing cost of agricultural
products of circulation enterprise is L, wholesaler
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Neural Computing and Applications (2020) 32:15357–15368
bears the warehouse costs of cold-chain logistics b1 ðtÞ
from the producing area to wholesaler, and retailer
bears the warehouse costs of cold-chain logistics b2 ðtÞ
from wholesaler to retailer. As the cold storage time
lapses, the cold energy consumption rises, and the
warehouse costs rise. If the time of circulation exceeds
a certain value, warehouse costs will exceed budget,
bringing about undesired burden to supply chain.
Suppose warehouse cost function is with time as an
independent variable, T is time limit [30].
4. Technical costs of the Internet of Things
The cost of adopting the Internet of Things is
Cr ðCr ¼ Cr þ Ct Þ. As for the application of the
Internet of Things, the following costs are to be born.
The first is fixed cost Ct of technology hardware (radio
frequency identification, video surveillance, sensor,
etc.). The second is variable label cost Cr for technol-
ogy application. The goods in cold-chain logistics of
fresh agricultural products are of a great variety and
large quantity, so the label cost Cr related to the change
of supply chain is more important to decision making.
The cost of adoption of the Internet of Things is
reflected in several links including wholesaling and
retailing and is born jointly by wholesaler and retailer.
Notwithstanding the high cost, the reduction of time of
circulation, acceleration, decline of product loss rate,
and improvement of product quality thanks to tech-
nology application together improve the efficiency in
the circulation process of supply chain [31].
5. Product cost
Product cost at the producing area is C0 , and the
residual value at the end of season is 0. For purpose of
this paper, product cost excludes cost depletions. All
decision makers are risk-indifferent and totally rational
[32].
6 Market demand function
The market demand function d ¼ APk cðtÞ is a func-
tion about retail price and product quality. At the same
price, consumers’ demand is in positive correlation
with the quality of fresh agricultural products (includ-
ing appearance, nutrition, water, etc.). A is market size
coefficient, and k is price elastic coefficient (k [ 1)
[33].
7. Cost function and profit function
Suppose the expression symbol of cost function is Cxy ,
the expressive symbol of profit function is pyx . y 2
fB; Dg stands for profits before and after adopting the
Internet of Things, respectively, and x 2 fU; S; Rg
stands for the whole cold-chain logistics supply chain,
wholesaler and retailer before and after adopting the
Internet of Things, respectively [34].
Neural Computing and Applications (2020) 32:15357–15368 15361

3 System model quantity excluding product loss. Under these constraint

conditions, wholesaler’s cost and revenue are [37]:
The decision-making conditions for adopting the Internet CSB ¼ ða1 ðt1 Þ þ b1 ðt1 Þ þ C0 ÞðqB =uðt1 ÞÞ ð6Þ
of Things were figured out by building cost and profit
model of cold-chain logistics of fresh agricultural products pBS ðwB Þ B B
¼ w q  ða1 ðt1 Þ þ b1 ðt1 Þ þ b1 ðt1 Þ
before and after applying the Internet of Things and com- þ C0 ÞðqB =uðt1 ÞÞ ð7Þ
paring the cost and profit of the main bodies of circulation
Equating the first derivation of the equation above to
at various levels [35].
zero, it can be deduced from (2) that
qB
R ½ k=ðw þ b 2 ðt1 Þ þ a 2 ðt 1 Þ þ a 2 ðt 1 Þ þ LÞ . Wholesaler’s
3.1 Decision-making model before adopting
optimal wholesale price is:
the Internet of Things
wB ¼ ½ða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þ=uðt1 Þ þ ða2 ðt1 Þ
ð8Þ
Before adopting the Internet of Things, the residual value þ b2 ðt1 Þ þ LÞ=kk=ðk  1Þ
of product at the end of season is zero, and the time of
circulation of fresh agricultural products is t1 . In the case of According to the equation above, wholesale price
wholesale price of wB , retailer’s revenue is directly influences retailer’s order quantity, and wholesale
pBR ðpB ; qB Þ ¼ ðpB  wB  b2 ðt1 Þ  a2 ðt1 Þ  LÞqB . Suppose price is affected by several factors, including product cost,
retailer is entirely rational and will set appropriate retail transportation and warehouse costs of wholesaler and
prices according to the actual market demand to seek the retailer, product loss rate, simple processing cost during
maximum revenue, and market demand function is circulation, and so on. To comprehend the influence of
wholesale price on the whole circulation process of supply
d ¼ APk cðt1 Þ, then PB ¼ ðAcðt1 Þ=qB Þ1=k . Obviously,
chain clearly, Eq. (8) is substituted into Eqs. (2) and (3) as:
retailer’s revenue is [36]: 
h i C a1 ðt1 Þ þ b1 ðt1 Þ þ C0
pBR ðqB Þ ¼ ðAcðt1 Þ=qB Þ1=k  wB  b2 ðt1 Þ  a2 ðt1 Þ  L qB qR ¼ Acðt1 Þ þ a2 ðt1 Þ
uðt1 Þ
k   ð9Þ
ð1Þ k  1 2k
þ b2 ðt1 Þ þ L
B k
The derivation of q is solved. Obviously, the second

derivation is less than zero. Equating the first derivation to a1 ðt1 Þ þ b1 ðt1 Þ þ C0
PB
R ¼ þ a2 ðt1 Þ
zero uðt1 Þ
 k  2 ð10Þ
qBR ¼ Acðt1 Þ ðk  1Þ=kðwB þ b2 ðt1 Þ þ a2 ðt1 Þ þ LÞ ð2Þ k
þ b2 ðt1 Þ þ L
k1
Substituting it into the known function
Equation (8) is substituted into Eqs. (4) and (5), and
PBR ¼ kðwB þ b2 ðt1 Þ þ a2 ðt1 Þ þ LÞ=ðk  1Þ ð3Þ
retailer’s cost and revenue are:
Thus, retailer’s cost and revenue under the optimal 
B a1 ðt1 Þ þ b1 ðt1 Þ þ C0
decision with the wholesale price offered by wholesaler CR ¼ Acðt1 Þ þ a2 ðt1 Þ
uðt1 Þ
are: 1k   ð11Þ
k  1 2k1
CRB ¼ Acðt1 ÞðL þ b2 ðt1 Þ þ a2 ðu1 Þ þ wB Þ þb2 ðt1 Þ þ L
ð4Þ k
 k 
 ðk  1Þ=kðL þ b2 ðt1 Þ þ a2 ðt1 Þ þ wB Þ a1 ðt1 Þ þ b1 ðt1 Þ þ C0
  pB
R ¼ Acðt1 Þ þ a2 ðt1 Þ
pBR ¼ Acðt1 Þ ðwB þ b2 ðt1 Þ þ a2 ðt1 Þ þ LÞ=ðk  1Þ uðt1 Þ
 k ð5Þ 1k   ð12Þ
 ðk  1Þ=kðwB þ b2 ðt1 Þ þ a2 ðt1 Þ þ LÞ k  1 2k1 1
þ b2 ðt1 Þ þ L
k k1
Besides, if retailer’s order quantity is qB , wholesaler’s
supply quantity should be larger than qB because the actual Retailer’s optimal order quantity (2) and wholesaler’s
coefficient of losses of agricultural products in the process optimal wholesale price (8) are substituted into Eqs. (6)
of circulation of cold-chain logistics must be considered. A and (7), and wholesaler’s minimum cost and optimal rev-
product preservation ratio function uðtÞð0  t  YÞ closely enue are:
related to the time of circulation has been established as
above. According to the function, if the order quantity is
qB , the wholesale market needs to transport qB =uðtÞ
products to pre-calculate the effective value of order

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15362 Neural Computing and Applications (2020) 32:15357–15368


a1 ðt1 Þ þ b1 ðt1 Þ þ C0 bear transportation and warehouse costs, they both should
CSB ¼ Acðt1 Þ þ a2 ðt1 Þ bear certain technical cost theoretically.
uðt1 Þ
k   Suppose wholesaler and retailer bear the technical cost
a1 ðt1 Þ þ b1 ðt1 Þ þ C0 k  1 2k
þ b2 ðt1 Þ þ L of adopting the Internet of Things payable by themselves
uðt1 Þ k
separately, wholesaler’s wholesale price after adopting the
ð13Þ Internet of Things is:

a1 ðt1 Þ þ b1 ðt1 Þ þ C0 wD
pB
U ¼ Acðt1 Þ þ a2 ðt1 Þ  
uðt1 Þ a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct a2 ðt2 Þ þ b2 ðt2 Þ þ L
1k   ð14Þ ¼ þ
k  1 2k 1 uðt2 Þ k
þb2 ðt1 Þ þ L
k k1 k
To sum up, the total circulation cost of cold-chain k1
logistics of single cycle is: ð17Þ
 k Retailer’s optimal order quantity and retail price are:
a1 ðt2 Þ þ b1 ðt2 Þ þ C0
CUB ¼ Acðt1 Þ þ a2 ðt1 Þ þ b2 ðt1 Þ þ L 
uðt1 Þ a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
  qD
R ¼ Acðt 2 Þ þ a2 ðt2 Þ
ð2k  1Þa1 ðt1 Þ þ b1 ðt1 Þ þ C0 uðt2 Þ
 þ a1 ðt1 Þ þ b1 ðt1 Þ þ LK k  
uðt1 Þ
k  1 2k
ð15Þ þ b2 ðt2 Þ þ L
k
k1 2k1
K¼ k is simplified into a constant, and the total ð18Þ
revenue is: 
 a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
a1 ðt2 Þ þ b1 ðt2 Þ þ C0 PD
R ¼ þ a2 ðt2 Þ
pB ¼ Acðt1 Þ þ a2 ðt1 Þ uðt2 Þ
U
uðt1 Þ  2 # ð19Þ
1k ð16Þ k
þ b2 ðt2 Þ þ L
þ b2 ðt1 Þ þ L H k1


2k1 k1 2k1 According to the equation above, the expression of
wherein H ¼ kðk1Þ k .
wholesaler and retailer’s minimum cost is:
Calculation of the model shows that both wholesale 
price and retail price are influenced by product loss rate and a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
CUD ¼ Acðt2 Þ
transportation and warehouse costs in circulation process. uðt2 Þ
k
Retailer’s order quantity is related to product loss rate and
product quality and influenced by transportation and þa2 ðt2 Þ þ b2 ðt2 Þ þ L ð20Þ
warehouse costs in circulation process. To sum up, in the  
a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct k  1 2k
circulation process of cold-chain logistics, besides the
influence of product loss rate and product quality on supply uðt2 Þ k

chain decision making, the influence of transportation and a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
warehouse costs also cannot be ignored. CSD ¼ Acðt2 Þ þ a2 ðt2 Þ
uðt2 Þ
1k  
k  1 2k1
3.2 Decision-making model after adopting þ b2 ðt2 Þ þ L
k
the Internet of Things
ð21Þ
After applying the Internet of Things in cold-chain logistics The expression of the total cost of supply chain is:
supply chain of fresh agricultural products, the time of 
a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
circulation is largely shortened (from t1 to t2 ), the circu- CUD ¼ Acðt2 Þ
lation efficiency is remarkably improved, and product loss uðt2 Þ
1k
rate is reduced so that wholesale can reduce supply quan-
þ a2 ðt2 Þ þ b2 ðt2 Þ þ L
tity without prejudice to the satisfaction of the order
 ð22Þ
quantity of retailer, and the cost of product losses. Mean- a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct 2k  1
while, product quality is improved so that retailer can 
uðt2 Þ k
adjust retail price of products to obtain a greater return. The 
shortening of time of circulation reduces transportation and þ a2 ðt2 Þ þ b2 ðt2 Þ þ L K
warehouse costs. Since both wholesaler and retailer will

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Neural Computing and Applications (2020) 32:15357–15368 15363

The expression of wholesaler and retailer’s maximum 0  Cr  CrT , the revenues of both wholesaler and retailer
revenue and the total revenue is: increase after adopting the Internet of Things.
 CrT ¼ ðcðt2 Þ=cðt1 ÞÞ1=k1 ðuðt2 Þ=uðt1 ÞÞ½ða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þ
a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
pD
S ¼ Acðt 2 Þ þ uðt1 Þða2 ðt1 Þ þ b2 ðt1 Þ þ LÞ  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ
uðt2 Þ
1k   ð23Þ  uðt2 Þða2 ðt2 Þ þ b2 ðt2 Þ þ LÞ:
k  1 2k1 1
þ a2 ðt2 Þ þ b2 ðt2 Þ þ L
k k1 Proof Take the example of wholesaler. According to the
 expressions (14) and (23) of revenue of wholesaler before
a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
pD
U ¼ Acðt2 Þ and after adopting the Internet of Things, and the decision-
uðt2 Þ 
1k   making condition of pD B
S  pS , then: Cr  ðcðt2 Þ=
k  1 2k1 1
þ a2 ðt2 Þ þ b2 ðt2 Þ þ L cðt1 ÞÞ1=k1 ðuðt2 Þ=uðt1 ÞÞ½ða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þþ uðt1 Þða2
k k1 ðt1 Þ þ b2 ðt1 Þ þ LÞ  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ  uðt2 Þða2
ð24Þ ðt2 Þ þ b2 ðt2 Þ þ LÞ:Suppose the term at the right side of the
The expression of the total revenue is: equation above is CrT , then the boundary value allowing
 both wholesaler and retailer to earn profit is consistent with
D a1 ðt2 Þ þ b1 ðt2 Þ þ C0 þ Cr þ Ct
pU ¼ Acðt2 Þ the boundary value of the whole supply chain.
uðt2 Þ
1k ð25Þ Deduction 2 If the cost of applying the Internet of Things
þ a2 ðt2 Þ þ b2 ðt2 Þ þ L H satisfies 0  Cr  CrT , the revenues of the whole supply chain,
wholesaler, and retailer all increase; if Cr [ CrT , the cost of
To ensure the principle that the revenue of the main technology application is excessively high, where both
body of circulation at various levels after adopting the wholesaler and retailer are unwilling to pay the high cost.
Internet of Things should not be less that before adopting
To sum up, if wholesaler and retailer adopt a dynamic
the Internet of Things, it is obvious that:
ordering and pricing mechanism in the process of circulation of
Proposition 1 After adopting the Internet of Things, the cold-chain logistics, a boundary value of technology applica-
total revenue of cold-chain logistics supply chain of fresh tion cost allowing both sides to earn profit can be obtained. In
agricultural products increases. The cost of adopting the other words, as long as the cost of technology application
Internet of Things is Cr ¼ Cr þ Ct . If 0  Cr  CrT , CrT ¼ remains in this interval, the whole supply chain can benefit from
ðcðt2 Þ=cðt1 ÞÞ1=k1 ðuðt2 Þ=uðt1 ÞÞ½ða1 ðt1 Þ þ b1 ðt1 Þþ C0 Þ þ the Internet of Things without extra adjustment.
uðt1 Þða2 ðt1 Þþ b2 ðt1 Þ þ LÞ  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ 
uðt2 Þða2 ðt2 Þþ b2 ðt2 Þ þ LÞ.
4 Performance analysis
Proof According to the total revenue expression (16) and
Eq. (25) before and after adopting the Internet of Things, and In the process of product circulation, wholesaler and

B 
the decision-making condition of pD U  pU , then: Cr retailer will be influenced by several factors, which will
 ðcðt2 Þ=cðt1 ÞÞ1=k1 ðuðt2 Þ=uðt1 ÞÞ½ða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þþ influence wholesale price, retail price, order quantity, and
uðt1 Þða2 ðt1 Þ þ b2 ðt1 Þ þ LÞ  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ  u the technical cost that wholesaler and retailer are willing to
ðt2 Þða2 ðt2 Þ þ b2 ðt2 Þ þ LÞ. Suppose the term at the right side of bear. This paper is mainly to analyze the decision making
the inequation is CrT . Obviously, its value is the boundary value and benefits of wholesaler and retailer before and after
deciding whether larger revenue is obtained after applying the adopting the Internet of Things.
Internet of Things to cold-chain logistics supply chain. Proposition 3 In the event that the cost of technology
Deduction 1 If the cost of applying the Internet of Things application satisfies 0  Cr  CrS , wholesaler reduces the
satisfies 0  Cr  CrT , the total revenue of cold-chain wholesale price; if Cr [ CrS , wholesaler will raise the
logistics supply chain of fresh agricultural products wholesale price.
increases; if Cr [ CrT , the cost of applying the Internet of CrS ¼ ðuðt2 Þ=uðt1 ÞÞða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þ þ ½uðt2 Þða2 ðt1 Þ
Things is excessively high, and it is not appropriate to
þ b2 ðt1 Þ  a2 ðt2 Þ  b2 ðt2 ÞÞ=k  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ
introduce this technology.
Proposition 2 In cold-chain logistics supply chain, the Proof Analyzing the expressions (8) and (17) of whole-
boundary value that allows both wholesaler and retailer to sale price before and after adopting the Internet of Things,
earn profit is the same and complies with the boundary suppose wD  wB and k=k  1 [ 0, Cr ¼ ðuðt2 Þ=
value allowing the whole supply chain to earn profit. If uðt1 ÞÞða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þ and uðt2 Þ [ uðt1 Þ; a2 ðt1 Þ þ

123
15364
b2 ðt1 Þ a2 ðt2 Þ  b2 ðt2 Þ [ 0, the value range of the equa-
tion above is of practical significance. Denote the right
term of the equation above as CrS . Similarly, if Cr \CrS ,
wD [ wB .
According to the expression of CrS , the greater the
change of loss rate of fresh agricultural products is, the
earnings brought by technical improvement is larger, and
the cost of technology application affordable by wholesaler
is higher; meanwhile, the more the time of circulation is
shortened due to technology application, the lower the cost
of transportation and warehouse wholesaler and retailer
spend, and higher cost of technology application the supply
chain can afford. In the event that the cost of technology
application is low, wholesaler is willing to bear more cost
to obtain more orders and even will reduce wholesale price
to promote order quantity to rise to realize small profits and
quick returns when necessary, but if the cost of technology
application is excessively high, wholesaler may pass on
part of cost to retailer by raising wholesale price, or refuse
to adopt the Internet of Things due to unwillingness to bear
high cost.
Proposition 4 In the event that the cost of technology
application satisfies 0  Cr  CrR , retailer reduces the
retail price; if Cr [ CrR , retailer raises the retail price,
wherein:
CrR ¼ ðuðt2 Þ=uðt1 ÞÞða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þ
þ ½uðt2 Þða2 ðt1 Þ þ b2 ðt1 Þ  a2 ðt2 Þ  b2 ðt2 ÞÞ
 ða1 ðt2 ÞÞ  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ:
Proposition 5 In the event that the cost of technology
application relative to order quantity of retailer satisfies
0  Cr  CrQ , retailer will increase order quantity; on the
contrary, if Cr [ CrQ , retailer will reduce order quantity.
The boundary value is:
CrQ  ðcðt2 Þ=cðt1 ÞÞ1=k ðuðt2 Þ=uðt1 ÞÞ½ða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þ
þ uðt1 Þða2 ðt1 Þ þ b2 ðt1 Þ þ LÞ  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ
 uðt2 Þða2 ðt2 Þ þ b2 ðt2 Þ þ LÞ:
Proof According to the expressions (9) and (18) of opti-
mal order quantity before and after technology application,
qB D
R  qR , and then:
Cr  ðcðt2 Þ=cðt1 ÞÞ1=k ðuðt2 Þ=uðt1 ÞÞ½ða1 ðt1 Þ þ b1 ðt1 Þ þ C0 Þ
þ uðt1 Þða2 ðt1 Þ þ b2 ðt1 Þ þ LÞ  ða1 ðt2 Þ þ b1 ðt2 Þ þ C0 Þ
 uðt2 Þða2 ðt2 Þ þ b2 ðt2 Þ þ LÞ:
According to the equation above, the cost of technology
application deciding retailer’s order quantity is influenced
by the circulation loss rate of fresh agricultural products. If
the cost of technology application is low, retailer is bound
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Neural Computing and Applications (2020) 32:15357–15368
to increase order quantity. If the cost of technology
application is high, retailer may reduce order quantity to
keep certain revenue as wholesaler adjusts the wholesale
price. The boundary value of cost has little to do with
product quality, but is influenced by the time of circulation,
and transportation and warehouse costs.
Proposition 6 The comparison expression of boundary
value is CrQ  CrT .
Proof Comparative observation shows that k [ 1 is
known, then 1=ðk  1Þ [ 1=k obviously is satisfied, and
because cðt2 Þ=cðt1 Þ [ 1, CrQ  CrT is proved to be true.
Proposition 7 The comparison expression of boundary
value is CrS  CrR .
Proof Comparison of boundary value between wholesale
price and retail price shows that because k [ 1, then
Muðt2 Þ=k\Muðt2 Þ is satisfied, and because M ¼
ða1 ðt1 Þ þ b2 ðt1 Þ  a2 ðt2 Þ  b2 ðt2 ÞÞ, CrS  CrR is proved to
be true.
Deduction 3 If the cost of applying the Internet of Things
is less than CrS , wholesaler will lower the wholesale price
with an expectation to obtain more order quantity; if the
cost satisfies CrS  Cr  CrR , wholesaler will raise the
wholesale price, and pass on a part of cost to retailer, but
the retail price of retailer is still lower than that before
technology application; if the cost of technology applica-
tion satisfies Cr [ CrR , retailer will raise the retail price to
ensure revenue.
Proposition 8 CrS \CrR ; CrQ \CrT .
Proof CrS \CrR , CrQ \CrT are proved in Propositions 6 and
7. This part will discuss whether CrR  CrQ is satisfied. Its
simplified form is: ða2 ðt1 Þ þ b2 ðt1 Þ  ða2 ðt2 Þ  b2 ðt2 Þ 
ðcðt2 Þ=cðt1 ÞÞ1=k ða2 ðt1 Þ þ b2 ðt1 Þ þ LÞ  ða2 ðt2 Þ þ b2 ðt2 Þþ
LÞ; A=uðt1 Þ  ðcðt2 Þ=cðt1 ÞÞ1=k ðA=uðt1 ÞÞ; ðcðt2 Þ=cðt1 ÞÞ1=k
[ 1, k [ 1, and then the conclusion of CrR  CrQ is
established.
Deduction 4 If the cost of applying the Internet of Things
is less than CrS , both the wholesale price and retail price of
supply chain are lower, and the main bodies of circulation
at various levels all earn profit; if the cost satisfies
CrS  Cr  CrR , the wholesale price of supply chain rises,
wholesaler cannot bear the cost solely and pass on a part of
cost to retailer, retailer obtains large profit due to tech-
nology application, and retailer’s retail price still is
retained lower than that before technology application to
stimulate market demand; if the cost of technology appli-
cation satisfies CrR  Cr  CrQ , both wholesaler and retailer
continue to raise their prices, increase order quantity, and
Neural Computing and Applications (2020) 32:15357–15368 15365

try to maximization profit by passing on cost to consumers;
if the cost of technology application satisfies
CrQ  Cr  CrT , wholesaler and retailer continue to raise
their prices, consumers lower their demand due to high
price, order quantity of the supply chain lowers, but there is
still a room for profit. Lastly, if the cost of technology
application satisfies Cr [ CrT , the profit of both wholesaler
and retailer declines, and the circulation improvement
brought by technology cannot offset technical cost, so the
main bodies of cold-chain logistics will abandon this
technology (Table 1).
5 Illustrative example
The model and propositions built for this paper were ver-
ified by referring to example parameters from related
studies [21].
The cost of litchi products is C0 ¼ 0:8 yuan/kg, the
demand size is A = 900,000, demand elasticity is k ¼ 2,
and logistics transportation cost is aðt1 Þ¼1:4 yuan/kg
(consisting of the transportation cost of a1 ðt1 Þ¼1:0 yuan/kg
born by wholesaler and the transportation cost of
a2 ðt1 Þ¼ 0:4 yuan/kg born by retailer). In initial circulation,
the product preservation rate function is uðt1 Þ¼0:83, pro-
duct quality function is cðt1 Þ¼0:8, and logistics warehouse
cost is bðt1 Þ¼ 1:0 yuan/kg (among which b1 ðt1 Þ¼ 0:4
yuan/kg is born by wholesaler, and b2 ðt1 Þ¼ 0:6 yuan/kg is
born by retailer). The quality of litchi is highly sensitive to
transport time. To improve litchi quality and preservation
rate, it is needed to adopt the Internet of Things, so cir-
culation enterprises need to bear an extra processing cost of
L = 0.2 yuan/kg for each product.
After adopting the Internet of Things, the logistics
transportation cost is aðt2 Þ¼ 0:9 yuan/kg, among which
a1 ðt2 Þ¼ 0:6 yuan/kg is born by wholesaler, and
a2 ðt2 Þ¼ 0:3 yuan/kg is born by retailer. The product
preservation rate function in initial circulation is
uðt2 Þ¼0:95, product quality function is cðt2 Þ¼0:9, logistics
warehouse cost is bðt2 Þ¼ 0:6 yuan/kg (among which
b1 ðt2 Þ¼ 0:2 yuan/kg is born by wholesaler, and b2 ðt2 Þ¼ 0:4
yuan/kg is born by retailer), and the cost of adopting the
Internet of Things is Cr ¼ 1:001. The parameter relation-
ship can be obtained by substituting the figures above into
the model built in this paper, as shown in Table 2.
According to Table 2, if the cost of adopting the Internet
of Things is Cr ¼ 1:001, the wholesale price of cold-chain
logistics supply chain decreases by 1.93%, the retail price
decreases by 5.52%, the order quantity increases by
26.04%, and wholesaler revenue and retailer revenue
increase by 19.078% and 19.077%, respectively. Based on
the conclusions of Table 1, it is clear that the cost of
adopting the Internet of Things is Cr ¼ 1:001 that falls into
0  Cr  CrS . It can be calculated based on the theoretical
model that the important boundary values influencing
decision making and efficiency parameter of cold-chain
logistics of fresh agricultural products are CrS ¼ 1:0605,
CrR ¼ 1:2031, CrQ ¼ 1:4249, and CrT ¼ 1:6603, respec-
tively, which complies with the relational expression of
boundary values proposed in Proposition 8,
CrS  CrR  CrQ  CrT . Apparently, the cost of technology
application Cr ¼ 1:001 indeed falls into the interval of [0,
CrS ], namely [0,1.0605].
To further verify the model, Fig. 2 is obtained by
equating Cr 2 ½0; 2 with other parameters remaining
unchanged. The vertical axis stands for changing value of
revenue of main bodies of circulation at different levels,
and horizontal axis for technical cost of the Internet of
Things. Obviously, if the cost of adopting the Internet of
Things is less than 1.6603 (CrT ), the revenues of main
bodies of circulation of cold-chain logistics at different
levels increase, and the revenue change is positive. With
the increase in the cost of technology application, the
growth rate of wholesaler revenue, retailer revenue, and the
whole revenue of supply chain keep declining until the cost
of technology application is larger than the boundary value
of 1.6603, where the revenues of all parties of supply chain
decline, the changing value of revenue becomes negative,
and the main bodies of circulation of supply chain at dif-
ferent levels will abandon the Internet of Things.
In the case that the Internet of Things is adopted,

Cr 2 ½0; 1:6603. Figure 3 shows the changing situation of

Table 1 Correlation between

Parameter variation Value range of the cost Cr of adopting the Internet of Things
cost of applying the Internet of
Things and wholesale and retail 0  Cr  CrS CrS  Cr  CrR CrR  Cr  CrQ CrQ  Cr  CrT Cr  CrT
prices, order quantity, and profit
of main bodies of logistics Order quantity Increase Increase Increase Decrease –
Wholesale price Decrease Rise Rise Rise –
Retail price Decrease Decrease Rise Rise –
Wholesaler’s profit Increase Increase Increase Increase Decrease
Retailer’s profit Increase Increase Increase Increase Decrease
Total profit of supply chain Increase Increase Increase Increase Decrease

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15366 Neural Computing and Applications (2020) 32:15357–15368

Table 2 Changes of decision parameters of supply chain before and after adopting the Internet of Things
Wholesale price Retail price Order quantity Wholesaler revenue Retailer revenue Total revenue of supply chain
(yuan) (yuan) (kg) (yuan) (yuan) (yuan)

wB ¼ 6:5012 PB

R ¼ 15:4024 qB
R ¼ 3034:97 pB
R ¼ 23372:9 pB
S ¼ 11686:5 pB
U ¼ 35059:4
D
w ¼ 6:3758 PD
R ¼ 14:5516 qD
R ¼ 3825:29 pD
R ¼ 27832:03 pD
S ¼ 13916:01 pD
U ¼ 41748:0

the Internet of Things is higher than that before, but retail

Fig. 2 Chart of changing trend of revenues of main bodies of cold-
chain logistics at different levels before and after adopting the Internet
of Things
wholesale price and retail price before and after adopting
the Internet of Things. In the event that the cost of tech-
nology application is less than 1.0605 (CrS ), both wholesale
price and retail price after adopting the Internet of Things
are lower than those before adopting the Internet of Things;
in the event that the cost of technology application satisfies
Cr 2 [1.0605, 1.2031], the wholesale price after adopting
price is still lower than that before, and wholesaler passes
on part of technical cost to retailer; in the event the cost of
technology application is larger than 1.2031, both whole-
sale price and retail price after adopting the Internet of
Things are higher than those before adopting the Internet of
Things. According to Fig. 4, Cr = 1.4249 is a key value
deciding that the changing trend of order quantity after
adopting the Internet of Things becomes from increasing to
decreasing; if Cr \ 1.4249, the growth rate of order
quantity decreases progressively; if Cr [ 1.4249, the
decrease rate of order quantity is slow in the beginning, and
then becomes fast, and the reduction range of order
quantity increases with the increase in technical cost.
Further discussions were made on changes in cost of all
parties of supply chain before and after technology appli-
cation, and the changes in transportation and warehouse
costs payable by supply chain were reckoned on this basis,
as shown in Table 3. Apparently, if the cost of adopting the
Internet of Things is Cr ¼ 1:001, the transportation cost of
cold-chain logistics supply chain decreases by 18.97%,
warehouse cost decreases by 24.37%, wholesaler cost
increases by 30.19%, and retailer cost increases by 10.21%.
This indicates that the reduction in transportation and
warehouse courses brought about by technology

Fig. 3 Changing situation of

wholesale price and retail price
before and after adopting the
Internet of Things

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Neural Computing and Applications (2020) 32:15357–15368
Fig. 4 Comparison of optimal
order quantity before and after
adopting the Internet of Things
Table 3 Cost changes of main bodies of supply chain at different levels before and after adopting the Internet of Things
Transportation cost (yuan) Warehouse cost (yuan) Wholesaler cost (yuan)
aðt1 Þ ¼ 4248:96 bðt1 Þ ¼ 3034:97 CSB ¼ 8044:51
aðt2 Þ ¼ 3442:76 bðt2 Þ ¼ 2295:17 CSD ¼ 10473:2
application offsets the increase in wholesaler cost and
retailer cost to a certain extent.
6 Conclusion
In this paper, analysis is mainly made on the impact of
reduction in the time of circulation of cold-chain logistics
supply chain on product preservation rate, product quality,
and transportation cost by building a cost-profit model
before and after adopting the Internet of Things, providing
a theoretical basis for cold-chain enterprises to decide
whether put investment in the Internet of Things or not.
The boundary values for wholesaler, retailer, and the whole
supply chain to earn profit are same. If the cost of adopting
the Internet of Things is less than the boundary value of
CrT , the main bodies of circulation at different levels all can
earn profit. This conclusion is largely different from the
boundary value calculated out by assuming that wholesaler
and retailer bear the cost of adopting the Internet of Things
separately in previous literature. This is because it is
assumed that the wholesale price of wholesaler remains
constant and wholesaler solely bears the related technical
cost in most of the previous literature; in this paper, it is
decided by dynamic variables, and studies are made on the
changes in wholesale price before and after adopting the
Internet of Things, to figure out the cost boundary value
15367
Retailer cost (yuan) Total cost of supply chain (yuan)
CRB ¼ 25253:5 CUB ¼ 33298:01
CRD ¼ 27832:0 CUD ¼ 38315:4
allowing all main bodies of supply chain at different levels
to earn profit.
After adopting the Internet of Things, the increment of
retailer profit is larger than that of wholesaler profit, and
the growth rate of retail price is larger than that of
wholesale price. In the event that the cost of technology
application is less than CrS , both wholesale price and retail
price after adopting the Internet of Things are lower than
those before adopting the Internet of Things. In other
words, if the cost of adopting the Internet of Things is low,
wholesaler chooses to solely bear the technical cost to win
more orders. If the cost of technology application satisfies
 
Cr 2 CrS ; CrR , wholesaler will pass on part of cost of
adopting the Internet of Things to retailer. This behavior of
wholesaler fully reflects the importance of the cost of
adopting the Internet of Things to strategic plan design of
supply chain enterprises. The more obvious the improve-
ment of the application of the Internet of Things over
product preservation rate function of fresh agricultural
products is, the cost affordable to main bodies of supply
chain is higher.
Acknowledgements The authors thank Project supported by Fujian
Provincial Social Science Research Base Major Project (Grant No.
2016JDZ037); Xiamen University of Technology high level talent
project(Grant No. YSK16009R). Ministry of Education, Humanities
and Social Sciences project ‘Research on the evolution of global
value chain of digital creative industry based on complex system’.
123
15368
Compliance with ethical standards
Conflict of interest We declare that we have no financial and personal
relationships with other people or organizations that can inappropri-
ately influence our work and there is no professional or other personal
interest of any nature or kind in any product, service, and/or company
that could be construed as influencing the position presented in, or the
review of, the manuscript entitled.
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