A holistic framework for lot sizing problem for fast-moving perishable products

Abstract

One of the major challenges being faced by manufacturing companies today is the issue of addressing various aspects of perishable products in a supply chain environment. To address this issue, the integrated lot size problem for a perishable product has been investigated in the present work. The problem is modeled as a single vendor multiple buyer system. A variant of the truckload discount scheme is applied and the proposed model is formulated as a mixed integer program (MIP). The traditional warehouses are replaced by ‘cross-docks' and situations in which, cross-docking would be more beneficial are highlighted. The problem of fleet selection is also addressed and various strategies to minimize the vendor cost are also highlighted for centralized and decentralized supply chains. Sensitivity analysis is then carried out on various input parameters such as setup cost at plant, variable transportation cost, fixed transportation cost, setup cost per order, holding cost and, lost cost, which underscores the significant impact of economies of scale in transportation on the total supply chain cost. Analysis of lead time-cost trade-off reveals that alternate modes of transportation could be explored, which significantly reduces the lead time of transportation, thereby minimizing the total supply chain cost.