Sourcing and production decisions for perishable items under quantity discounts and its impacts on environment

Abstract

Perishable raw materials are commonly used in people's daily life. However, some of the raw materials' perishability, such as fruits and milk, raises a vital concern in food supply chain during transportation, processing, storage and sales. In this study, we propose a novel sourcing-production-inventory (SPI) system considering single manufacturer and product, and analyze sourcing and production decisions under quantity discount and investigate the consequent impact on the natural environment due to spoilage of raw materials. First, considering ordering, storage, disposal and production costs, we also propose and develop a SPI model. Besides, we concretely analyze the impacts of quantity discounts on optimal solutions, objective function values, and the environment related issues. Our conclusions are also robust to the analysis using numerical methods. Moreover, the theoretical and computational results show that, quantity discount motivates the transfer of raw material's perishability from the supplier to the manufacturer, which would exacerbate the worsening of the environment. And the transfer is more evident when raw material's spoilage and disposal cost is low. To reduce raw material's spoilage, the government is suggested to impose an additional resource waste tax on the manufacturer. Other strategies to reduce the waste of resources are also discussed in the paper.