Consumer response to adjustable price and shelf-life of fresh food products under effective preservation policy

Abstract

Food products deteriorate with time, that affects their freshness and demand. Several preservation policies have been suggested in literature for controlling the deterioration. This research work proposes a supply chain model comprising of a manufacturer and a retailer for deteriorating products with controllable rates of deterioration by improving product’s lifetime (freshness) through preservation in form of storage conditions and delayed ripening agents (preservatives). Customers’ purchasing power controls the purchase quantity; thereby allowing them to buy more products for lower prices and vice versa. This observation is incorporated in this study by considering selling price dependent demand for fresh food items. The proposed model considers a variable (lifetime dependent) component of selling price to integrate consumers’ behavior of buying fresher products for higher prices. The proposed supply chain is presented as a nonlinear mathematical model which is solved by using analytical optimization methods and numerical approaches. Considering the given assumptions, this study explores optimal decision-making for selling price, investment in preservation technology (PT), and cycle time for optimizing product’s freshness, deterioration rate, and demand to maximize the total supply chain profit. The results of the numerical experiments reveal the benefits of the proposed policies by exhibiting significant improvements in product’s freshness, deterioration rate, demand, and profitability. A nexus of the product’s freshness, selling price, and demand is investigated which suggests keeping the total selling price unchanged while improving the demand by increasing freshness through the proposed preservation policy. Some managerial insights are provided for decision-making within food chains.