Integrated procurement and distribution of perishable products in a multi-echelon supply chain system

Abstract

[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT AUTHOR'S REQUEST.] This paper presents solutions to the grocery industry's perishable inventory problem. To meet their customers' increasing desire for various kinds of perishable products from all over the world, management must deal with widely different suppliers and customers. They must make optimal operational decisions on how to handle procurement and distribution of ordered items. This is crucial to their profit margin especially when dealing with the deterioration of time sensitive goods in transit. This thesis analyzes when products should be ordered, how much of perishable items should be replenished and how goods are allocated to retail stores. A three-level supply chain is studied in this model, which consists of non-identical suppliers, distribution centers and retail stores. Existing models in the related literature often have negligible or identical lead-times of suppliers, and sole source suppliers taking advantage of their exclusivity. However, a grocery company usually has various suppliers (with quantity discounts) and operates multiple warehouses and retail stores. This research will focus on this more comprehensive scenario. Another problem in previous models is FIFO (First-In-FirstOut) or LIFO (Last-In-First-Out) inventory policy, since the decreasing price towards the end of the shelf life has a negative impact on revenue. However, in order to achieve the highest profit, optimal decisions are based upon items in each stage of aging. The results will show comparison among the three inventory policies under different decay models.