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3625. Shelf-life requirements and their impact on contractual agreements in perishable-product supply chains

Invited abstract in session MB-50: Retail Inventory Management I, stream Retail Operations.

Monday, 10:30-12:00
Room: M2 (building: 101)

Authors (first author is the speaker)

1. Sandra Transchel
Kuehne Logistics University
2. Mahyar Tahery
Kuehne Logistics University
3. Andreas Gernert
Kuehne Logistics University

Abstract

Two primary goals of grocery retailers when managing perishable products (e.g., food) are (i) to offer products with a high remaining shelf life to consumers, as those are perceived to be of high quality, and (ii) to minimize waste driven by products that exceed their maximum remaining shelf life. Both goals prompt retailers to integrate a minimum remaining shelf-life requirement, known as “Minimum Life on Receipt” (MLOR), into the contracts with their suppliers. However, little is known about how such an MLOR requirement affects the contractual agreement between retailers and food producers and how it further affects replenishment and production decisions, profitability, and waste of the retailer and the food producer. In this paper, we investigate how an MLOR requirement of the retailer affects the operational performance of a wholesale price contact in a two-echelon perishable-product supply chain. We consider that both the retailer and the food producer follow a basestock policy, where the basestock levels are optimized depending on the wholesale price set by the food producer and the MLOR requirement. Our results challenge widely accepted findings that retailers benefit from organizing their inventory management following a first-in-first-out (FIFO) issuing policy compared to a last-in-first-out (LIFO) policy.

Keywords

Status: accepted

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