A multi-level multi-product supply chain network design of vegetables products considering costs of quality: A case study

Abstract

Effective logistics management is crucial for the distribution of perishable agricultural products to ensure they reach customers in high-quality condition. This research examines an integrated, multi-echelon supply chain for perishable agricultural goods. The supply chain consists of four stages: supply, processing, storage, and customers. This study investigates the quality-related costs associated with product perishability to maximize supply chain profitability. Key factors considered include the network design, location of processing and distribution centers, the ability to process raw products to minimize post-harvest quality degradation, the option to sell the excess produce to a secondary market due to unpredictable yields, and the decision not to fulfill demand from distant customers where significant quality loss and price drops would be involved, instead diverting those products to the aforementioned secondary market. Quantitative methods and linear mathematical programming are employed to model and validate the proposed supply chain using actual data from a real-world case study on vegetable supply chains. The main contribution of this research is the incorporation of quality costs into the objective function, which allows the supply chain to prioritize meeting nearby customers’ demands with minimal quality loss over serving distant customers where high quality loss is unavoidable. Additionally, deploying a faster transportation fleet can significantly improve the overall profitability of the perishable product supply chain.