Effective logistics management strategies for perishable food supply chains; impacts on food quality, safety and waste

Effective logistics management strategies for perishable food supply chains; impacts on food quality, safety and waste Prof.dr.ir. Jack G.A.J. van der Vorst Dr. Roberto Rossi, (Dr.) Willem Rijpkema Wageningen University, NL 13/06/14

Logistics Management is about getting the right product in the right quantity and the right quality/safety at the right time, and at the right place in the food supply chain. as efficient as possible with minimal carbon footprint and product losses!

Topics in Supply Chain Logistics Farmer Processor DC Retail Consumer - Transportation (choice of modality; planning of collection; routing; loading...) - Production (planning of harvesting; blending; processing ) - Inventory control (which products, amounts, where when to store and order?) - Network design (factories; DC s; Retailers) - Supply Chain Management (coordinating the supply chain)

Problem description Consumers demand year- round availability fruits & vegetables However, fresh chains face Variation in consumer demand AND supplied volumes and quality Decaying fresh product quality, affected by Temperature, Humidity, Concentration O2, ethylene, Global sourcing is required Product Availablilty Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Country Belgium Strawberry Egypt Netherlands Spain

Our contribution The aim of our task is to develop a simulation model that can assess the impact of different logistics systems designs (scenarios) on specific product quality parameters and total!"#$%&-352#6 logistics costs, to be used on specific cases. 7*5#"4)-1#*352#6 0'-)123$'4)*$!"#$%&'" (")*+,#"-./ /#*+%4'"3$'4)*$ (")*+,#"- 0'-)123#%-2'- (")*+,#"- /#*+%4'" 5 5

Case study: strawberries from Egypt - NL +$((,-#".%&/,(0,-)"1#2 =72(-7>4($-%&3,)674. 3-45,)),2%&3,)674.!"#$%&'(")* 8),5"1#-7"%&96*:( ;"7-$%&96*:( <"-.%&96*:( 13/06/14 6

Research focus We investigate the impact of dual sourcing strategies and different inventory management policies Dual sourcing: ship a large volume of products via a cheap, but usually slow shipping mode, which we will call regular. when needed ship via an expedited shipping mode, which is more expensive. Inventory management policies: Take product quality decay into account when ordering products in all stages of the chain 7

13/06/14 Botrytis cinerea in strawberries (Hertog et al 1999) Model includes the effect of temperature ( k s ) a n d s t o r a g e atmosphere (RelMR). 8

Overview developed simulation models Logistics scenarios Inventory control policies Multi-modality Initial quality/ contamination Decay/growth models Temperatures, etc. Service: stock outs product availability. Model that represents chain structure Logistics cost Contamination risks Product quality/ waste 9

Supply chain scenarios Order policies (replenishment strategies) that take or do not take into account the quality of the products Transport modalities Consumer selection behavior: FIFO, LIFO? Level of initial contamination Remaining product shelf life after harvest Production schedule (every day, twice a week) Demand uncertainty 13/06/14 10

Performance indicators Costs Transportation costs per ton of products (Boat, Plane, Truck) Inventory holding costs at producer, DC, retailers Shortage cost (Distributor cannot fulfill demand) Retailer claim cost (quality saleable but at lower price) Product waste (if product is no longer saleable due to low quality) Transportation time (lead- time) Boat, Plane, Truck Service level Stock outs at retailers and distributor Quality level, product age 13/06/14 11

Results: cost drivers

2000 0 500 1000 Punnets 3000 Results: Retailer waste 1 2 3 4 5 6 7 8 9 10 Scenario 13/06/14 13

Conclusions Standard order policies are ineffective in delivering a sufficient product quality with reasonable waste in this strawberry supply chain Including costs for expected losses of shelf life in standard order policies improves product quality at the point of sale Improved quality at the source significantly impacts product quality at consumption and retailer waste Decision makers in perishable product supply chains should achieve a trade- off between logistics cost drivers and indicators related to product quality.

Can form postponement reduce waste in an international lettuce supply chain? Harvest in Spain Store Transport to distributor B Transport to retailer B 1 2 3 Make to stock Make to stock Make to order Where to cut, pack, mix, and diversify, considering Product availability Product quality (safety?) Inventory levels Costs... (out of stock) (browning, waste) (SKUs * average levels) (transport, waste,...)

Overall findings Decision makers may improve logistics decisions and thereby improve food quality/safety and reduce food waste at lower cost by predicting and using product quality information Effective logistics strategies reduce the impact of product quality variability or dynamic product quality The presented case studies demonstrate that supply chain flexibility and responsiveness is required to reduce the impact of product variability and quality decay. Increasing responsiveness and flexibility typically comes at the expense of other performance dimensions, and obtaining insight into trade- offs is therefore important. 13/06/14 18

Thank you for your attention Prof. dr. ir. Jack G.A.J. van der Vorst Logistics, Decision and Information Sciences Wageningen University and Research Centre Hollandseweg 1, 6706 KN Wageningen, The Netherlands Tel.nr. (31) 317 48 2387 / 5645 E-mail: Jack.vanderVorst@wur.nl Internet: http://www.wageningenur.nl/orl