Abstract:
The demand for perishable food products is often influenced by the selling price and the age of the items. This is
because perishable food products have become commodities from consumers’ point of view, hence, there are
very little differences between competing brands. Consequently, factors like price and freshness (or age) become
important determinants of consumer demand. This fact has been used to develop several models for managing
perishable inventory. However, most of these models were developed from the perspective of a retailer. Today’s
increasingly competitive business environment has forced companies to collaborate with fellow supply chain
members in an effort to improve profitability and operational efficiency. With this in mind, this article presents a
model for managing inventory in a perishable food products supply chain that begins with farming operations
where live inventory items are reared and ends with the consumption of processed inventory. The farming and
consumption (retail) stages are connected by a processing stage during which live inventory is processed into a
consumable form. Consumer demand at the retail stage is a function of the selling price and the freshness of the
processed inventory. The farming, processing and retail stages are the three-echelons of the proposed supply
chain aimed at maximising the joint supply chain profit. Through a numerical example, the benefits of jointly
optimising the inventory replenishment policy (among all three echelons) are quantified by comparing the
network performance of a joint optimisation approach (i.e. centralised) to that of an equivalent independent (i.e.
decentralised) optimisation policy.
