Dynamic pricing and inventory control policies in a food supply chain of growing and deteriorating items

Abstract

Revenue and inventory management play a crucial role in the operational efficiency of food supply chains. The current study investigates dynamic pricing and inventory control policies in a two-level Food Supply Chain (FSC) of growing and deteriorating inventory that involves a rearing farm as the supplier and a retailer where these slaughtered items are prone to deterioration. The rearing farm breeds newborn animals, then slaughters them and sends the items to the retailer. The negative impact of overbreeding is taken into account to preserve the items’ quality and decrease food waste on the supply side. The model is analyzed under decentralized and centralized supply chain scenarios with a profit-sharing contract as the coordination tool in the centralized case. An analytic solution approach based on non-linear convex programming is developed to solve the problem. The developed structure is illustrated through experimental results with a real estimated growth function for broiler chickens. Sensitivity analysis is carried out to investigate the impact of different input parameters. It is shown that the centralized supply chain scenario not only enhances the profit of the supplier and the retailer but also is more desirable for the customers as the selling price of the items decreases in this setting. The results provide decision-makers of each echelon with insights into the features of the studied FSC, including their most influential input parameters, the areas that require further attention, and managerial suggestions under different scenarios.