Optimal inventory replenishment and shipment policies in a three-echelon supply chain for growing items with expiration dates

Abstract

The primary source of a vast majority of consumable food products is growing items such as crops or livestock. Most of these food products have specified maximum shelf lives or expiration dates. This implies that the products are no longer suitable for human consumption beyond their expiration dates. In addition, consumers rarely eat these products in their original form, this means that there are usually some forms of value-adding activities performed on the growing items in order to transform them into a consumable form, for instance, processing and packaging. Consequently, this study develops a model for managing inventory in a three-echelon supply chain for growing items with distinct farming, processing and retail operations. At the farming echelon, the growing items are reared but there is the possibility that some of them might die. The surviving items are then transferred to the processing echelon for slaughtering, processing and packaging. The processed inventory is then transferred to the retail echelon where consumer demand for consumable (i.e. processed and packaged) inventory is met under the assumption that the inventory has a specified expiration date. The proposed supply chain system is modelled as a cost minimisation problem. The benefits of integrating inventory replenishment decisions among all supply chain members are quantified through a numerical example.