Investment in Food Waste Prevention: Modeling trade-offs under stochastic supply attributes and consumer in-store picking behavior

Description

Mismatch of supply and demand for perishable products causes food waste. Yet, taking food waste prevention investments in a supply chain symbolizes a coordination challenge. This work investigates investment opportunities in freshness keeping efforts, i.e., preservation technology and process improvement to reduce post-harvest quality variation. Such investment opportunities are cash-flow constrained. Due to financial pooling from supplier trade credits, grocery retailers indicate efficient liquidity maintenance. In contrast, perishable product suppliers' financial performance is disadvantageous due to the industry-wide delayed receivable accounts. Therefore, grocery retailers opt to support their supplier liquidity by enabling loans guaranteed by payable invoices, simultaneously serving as a sales mechanism, and enabling reverse factoring. Under this premise, this work develops a hybrid simulation-optimization model to investigate the relation between potential savings from food waste reduction, investment in freshness keeping efforts and the factoring interest price towards maximizing the supply chain profit. The Fresh Case Cover (FCC) and the share of food wasted value between the supply chain members while considering the in-store consumer picking behavior are elaborated as levers to ensure coordination. Replenishment configurations that consider the Old Inventory Ratio (OIR) are extended by considering this setting. Furthermore, this work integrates the corresponding demand-supply equilibrium outcome in the optimization approach. Initial computational experiments evaluate investments in reducing the minimum ordering quantity threshold for perishable products by increasing the overall amount of packaging material used. Besides profitability, a trade-off between the environmental impact of food waste and prevention interventions is highlighted.

Period	22 Aug 2022 → 26 Aug 2022
Event title	21st International Symposium on Inventories (ISIR 2022)
Event type	Conference
Location	Budapest, HungaryShow on map
Degree of Recognition	International