Choices Article - Supply Chain Contracts and Food Safety

Table 1

The influence of contamination rate on the supplier's return per lot and buyer's cost per lot.

Contamination rate	Probability that a lot passes inspection	Probability that a contaminated lot passes inspection	Production cost/lot ($)	Supplier's return/lot ($)^a	Buyer's cost/lot ($)^b
0.00	0.99	0.000000	1.000	0.0046	1.0300
0.02	0.97	0.000206	0.942	0.0043	1.0403
0.04	0.95	0.000421	0.887	0.0020	1.0510
0.06	0.93	0.000644	0.835	-0.0024	1.0622
0.08	0.91	0.000878	0.787	-0.0090	1.0739
0.10	0.89	0.001121	0.741	-0.0177	1.0861
^a Supplier's return per lot is net of inspection failure costs and the allocated portion of safety failure costs. ^b Buyer's cost per lot includes the portion of safety failure costs that could not be allocated to the supplier.