An integrated single-vendor multi-buyer production-inventory policy for food products incorporating quality degradation

Existing studies on models of perishable inventory policy are mostly established according to the base assumption that a fraction of items stocked depletes instantaneously over time due to direct spoilage. For food products over the storage time the quality does degrade, however, the quantity of items typically remains constant. Therefore, this research proposes an integrated approach for addressing food inventory policy for managing the flow of a food product incorporating different quality characteristics, in a supply chain system, comprising a single vendor and multiple buyers (SVMB). The kinetic model is applied to represent the quality degradation of the raw material at the vendor (manufacturer), while the shelf-life based pricing is adopted to characterise the value degradation of finished goods at the buyers (retailers). A mathematical model representing the considered system is established to maximise the joint profit of the whole system. It is achieved by coordinating the manufacturing cycle and the inbound-outbound delivery frequencies of materials over the manufacturing cycle. The numerical test shows that the proposed model returns a better benefit compared to the benchmark model.