Fresh-product supply chain coordination and waste reduction using a revenue-and-preservation-technology-investment-sharing contract: A real-life case study

Abstract

In fresh-product supply chain (FSC) management, reducing product waste throughout the system is of high importance both from an economic and an environmental point of view. In this research, a novel coordination mechanism based on preservation-technology investment is developed not only to decrease the amount of waste, but also to improve the profits of independent FSC members. The investigated FSC consists of a single-supplier and a single-buyer, where the market demand is sensitive to the retail price and freshness degree of products. The supplier decides on the level of preservation-technology investment and wholesale price while the buyer determines the order quantity and retail price. Accordingly, three decision-making approaches are proposed and analyzed: (1) decentralized approach where each member individually optimizes its decisions, (2) centralized approach where a unit decision-maker optimizes the FSC decisions from the whole FSC viewpoint, and (3) coordinated approach where an incentive mechanism is proposed to guarantee more profitability for the whole FSC system and its members than the decentralized approach. To this end, a new coordination contract named revenue-and-preservation-technology-investment-sharing (RPTIS) is designed to convince the FSC members to move from the locally optimum solution (i.e., decentralized approach) to the globally one (i.e., centralized approach). The proposed approaches are validated by the use of a data set obtained from a real-life case study. The results demonstrate that the proposed RPTIS mechanism is able to achieve FSC coordination and convince members to make globally optimum decisions. Moreover, the proposed mechanism not only increases the whole FSC profit along with the individual members' profit, but also significantly increases the freshness degree and surviving quantities of fresh products; thereby reducing the level of product waste.