Abstract
Food waste stemmed from food contamination and ineffective quality control is a significant challenge to food management. Supply chain traceability has become an essential task of the food industry for guaranteeing food quality and safety and reducing food waste. Radio Frequency Identification (RFID) has emerged as a lead technology in the development of traceability systems, which enable automatically capturing of food information along the supply chain. However, the significant investment cost has been a major obstacle in the diffusion of traceability systems in the food industry. This study conducts a cost-benefit analysis of a RFID-enabled traceability system for a two-level perishable food supply chain, which consists of an upstream supplier and a downstream retailer. Consumer perceptions of food quality and safety are jointly considered when evaluating the value of a traceability system. The optimal decisions of the supply chain participants are derived in both centralized and decentralized systems, in terms of wholesale price, order quantity, price markdowns, and granularity level of the traceability system. The results show that a dynamic pricing policy supported by the traceability system could significantly reduce food waste and improve the retailer’s performance. We further propose a two-part tariff contract to coordinate the supply chain and to distribute benefits and costs of the traceability system between supply chain participants. This study demonstrates that a well-developed traceability system could significantly improve the supply chain performance and become a profitable investment for the food industry.
Highlights
In the past two decades, food traceability has drawn huge attention due to consumers’ increasing concern over the quality, safety, and environmental sustainability of food products
This paper aims to conduct an economic analysis for a perishable food supply chain in consideration of the Radio Frequency Identification (RFID) traceability system
The contribution of this paper is threefold: (i) an economic analysis of the traceability system is first conducted in a two-level supply chain framework, including both the transportation and retailing process; (ii) a profit sharing scheme is proposed for the distribution of benefits and costs of a traceability system among supply chain participants; (iii) consumer perceptions of food quality and safety are jointly considered when evaluating the value of traceability system
Summary
In the past two decades, food traceability has drawn huge attention due to consumers’ increasing concern over the quality, safety, and environmental sustainability of food products. A critical issue is to integrate traceability functions with perishable food supply chain management so as to reduce food waste and improve supply chain performance. The RFID tags embed specific sensors (such as temperature, humidity) that enable the automatic capture of related data that are critical to the quality and the safety of food (such as history of temperature, humidity, and time period), providing the managing system with a real-time description of the state of the perishable food [14]. The cost of RFID tags and the significant initial investment to build up the traceability infrastructures are major obstacles in the diffusion of RFID-enabled traceability systems in supply chain management [17]. A distribution scheme of the benefits and costs of the traceability system among participants has been proposed to synchronize their activities in the supply chain
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