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Int. J.

Production Economics 131 (2011) 421429

Contents lists available at ScienceDirect

Int. J. Production Economics


journal homepage: www.elsevier.com/locate/ijpe

An optimization approach for managing fresh food quality throughout


the supply chain
Aiying Rong a,b, Renzo Akkerman c, Martin Grunow c,
a

Department of Information Technology, University of Turku, Joukahaisenkatu 3-5, 20014 Turku, Finland
Center for Applied Mathematics and Economics, ISEG-Technical University of Lisbon, Rua do Quelhas 6, 1200-781 Lisboa, Portugal
c
Department of Management Engineering, Technical University of Denmark, Produktionstorvet 424, 2800 Kgs. Lyngby (Copenhagen), Denmark
b

a r t i c l e in fo

abstract

Article history:
Received 28 July 2008
Accepted 13 November 2009
Available online 26 November 2009

One of the most challenging tasks in todays food industry is controlling the product quality throughout
the food supply chain. In this paper, we integrate food quality in decision-making on production and
distribution in a food supply chain. We provide a methodology to model food quality degradation in
such a way that it can be integrated in a mixed-integer linear programming model used for production
and distribution planning. The resulting model is applied in an illustrative case study, and can be used
to design and operate food distribution systems, using both food quality and cost criteria.
& 2009 Elsevier B.V. All rights reserved.

Keywords:
Supply chain management
Mixed-integer linear programming
Food industry
Quality modelling

1. Introduction
Through an integrated management of their supply chains,
companies react to increasingly competitive markets and trends
towards globalization. Supply chain management (SCM) can be
dened as the task of integrating organizational units along the
supply chain and coordinating material, information and nancial
ows in order to full (ultimate) customer demands with the
aim of improving competitiveness of a supply chain as a whole
(Stadtler and Kilger, 2008). As such, SCM should result in an
internally consistent view on how a supply chain should look like
in terms of production and distribution processes and their
coordination.
1.1. Food supply chain management
Despite the food sectors relevance, food SCM has received only
little attention in the literature. The reason may be that the
management of food supply chain networks is complicated by
specic product and process characteristics. These characteristics
have often also limited the possibilities for supply chain
integration in food supply chains (Van Donk et al., 2008). In
relation to modelling approaches, the inclusion of food-specic
characteristics is needed to be successful in this area. One of the
most essential food product characteristics to consider throughout the supply chain is product quality (e.g. Smith and Sparks,
 Corresponding author. Tel.: + 45 4525 4440; fax: + 45 4525 6005.

E-mail address: grunow@man.dtu.dk (M. Grunow).


0925-5273/$ - see front matter & 2009 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2009.11.026

2004). Maintaining high food qualitywhich degrades depending


on environmental conditions of storage and transportation
facilities (Labuza, 1982)is of vital importance for supply chain
performance. Apart from being a performance measure of its own,
food quality is directly related to other food attributes such as
integrity, safety, and shelf life.
Trienekens and Zuurbier (2008) recently stated the expectation that quality assurance will dominate the process of production and distribution in food chains in the future. This also means
that product ows with different quality attributes could be
directed to different logistical distribution channels (with different environmental conditions) and/or different customers (with
different quality demands) in the supply chain. In fact, one of the
keys to SCM for the food industry is an integrative view on
logistics and product quality, which is labelled quality controlled
logistics by Van der Vorst et al. (2007).
In order to address practical real-world challenges, the
dynamic nature of the chain should be tackled properly, e.g.
stock levels and product quality should be controlled explicitly. In
the following, we briey review the relevant literature in this
area.
1.2. Modelling approaches
Considering the broad spectrum of relevant management
decisions in supply chains, no quantitative model can capture
all aspects. This often results in a focus on a certain issue, which
for food-related research mostly concerns the perishable nature

of food products. For instance, Lutke


Entrup et al. (2005) presented
mixed-integer linear programming models for integrating shelf-life

422

A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

consideration in yogurt production, and Myers (1997) presented a


linear programming model to determine the maximal satisable
demand for the products with limited shelf life.
In the inventory-theory-based literature, product quality
control is closely associated with product perishability, i.e.,
product perishability creates uncertainty for the buyer with
respect to product quality, safety and reliability of supply. It also
creates uncertainty for the seller in locating a buyer, as perishable
products must be moved promptly to the marketplace to avoid
deterioration, leaving sellers unable to store the products
awaiting favourable market conditions. The basics of production
and inventory systems with deteriorating items have been
extensively studied, as reported in review articles by Nahmias
(1982), Raafat (1991) and Goyal and Giri (2001). These articles
distinguish between two types of perishability: xed life time and
random life time. In the former case, products may be retained in
stock for some xed time after which they must be discarded;
in the latter case, items are discarded when they spoil and time
to spoilage is uncertain. Most of literature focuses on perishable
products with xed life span. For food products, the moment
of spoilage is variable, and highly dependent on environmental
conditions such as temperature, which is not covered by
inventory-theory-based modelling approaches.
In this paper, the focus is on production and distribution
planning. This integration of two functional areas is one of the
lines of research mentioned by Min and Zhou (2002) when they
discussed the growing needs in supply chain modelling efforts.
Related work by Eks- ioglu and Jin (2006) resulted in a planning

model that integrated production, inventory and transportation


decisions in a two-stage supply chain for perishable products. But
their model does not consider transportation between the
facilities and further also enforces that each retailer is assigned
to exactly one facility. Ahuja et al. (2007) studied a two-stage
logistic network similar to that by Eks- ioglu and Jin (2006) with

additional production and inventory capacity constraints. In


Ahuja et al. (2007) and Eks- ioglu and Jin (2006), as well as in

Lutke
Entrup et al. (2005) and Myers (1997), product quality was
implicitly considered by constraining the shelf life of the product.
A more advanced way of including product quality can be seen in
Zhang et al. (2003), who considered a three level distribution
system with xed plant locations, potential central and distribution warehouses, as well as retailers. In their study, product
quality is represented as a function of time and temperature for
production, transportation, and storage. But their approach is still
a traditional network approach and product quality degradation is
not captured in the representation of the network explicitly. That
is, the model itself treats quality degradation as given.

1.3. Paper scope and outline


In practice, the quality degradation of products does not have
to be assumed xed, as it is possible to inuence it through the
environmental conditions during storage and transportation
as well as the varying length required for these operations. In
the determination of product quality or its remaining shelf life,
temperature is the main environmental condition leading to
quality degradation of the food product (e.g., Labuza, 1982).
Controlling product quality throughout the supply chain therefore
requires a focus on both time and temperature, as Zhang et al.
(2003) also show. Often, temperature in storage and in the
distribution channels can be changed at a cost that is outweighed
by the benets of increased shelf life and safety. Consequently, we
aim at determining the duration of the storage and transportation
activities together with the appropriate temperature for the
different locations and transportation equipment in order to

obtain a trade-off between the logistics and quality preservation


costs on the one hand and the costs for product waste on the other
hand. For this purpose, we combine food quality decay models
with logistics models. We develop a way to include linear or
exponential product quality degradation models in single-product
production and distribution planning models based on mixedinteger linear programming. To capture the dynamics of the decay
and the distribution, we pursue a multi-period modelling
approach and study a generic distribution network structure.
This generic structure, combined with the integration of common
quality degradation models, results in a modelling approach that
is applicable to a wide variety of food products. Since it takes
some time to transport the food products from the production
sites and warehouses to the retailers, we also consider the
planned transport lead times for supply chain operations planning, similar to the planned production lead time used by Spitter
et al. (2005).
Similar to the viewpoint of Van der Vorst et al. (2007), we
advocate differentiation of product ows based on the absolute
batch quality and we therefore trace quality changes through the
entire supply chain network under the temperature-controlled
logistics environment. This allows us to also capture the inherent
heterogeneity in quality of product batches, which is of particular
importance in the food industry as the natural input materials
strongly vary in quality, which may result in batches of different
qualities, even at the initial levels of the distribution network.
The resulting model can be a useful tool for planning logistics
distribution operations with respect to costs and food quality
preservation in a dynamic environment. It should be noted that in
the application of a quantitative model like the one presented in
this paper, the implementation process is often as important as
the modelling and analysis part, which is why we present an
illustrative case study in the second part of this paper. Close
interaction between analyst and decision-maker is essential in
realising a successful implementation (Niemi et al., 2007).
The remainder of this paper is organized as follows. In Section
2, we give a brief background on quality degradation of food
products in terms of time and temperature. Section 3 then
presents an integrated model for quality-based food production
and distribution. In Section 4, we discuss an illustrative case study
dealing with a fresh vegetable supply chain and show how our
modelling approach can be applied. Finally, Section 5 discusses
the results of this paper and presents some future research
opportunities.

2. Modelling quality degradation


In the following, we briey introduce the dynamics of quality
degradation, as this plays an important role in modelling quality
in food supply chains. By no means, this should be considered a
complete overview of something that is a eld of research by
itself. For a more detailed discussion, we refer to e.g. Labuza
(1982) or Man and Jones (1994).
In general, quality degradation of food products in storage (or
transport, for that matter) is dependent on storage time t, storage
temperature T, and various constants (e.g., activation energy, gas
constant). It can be described by the following general equation:
dq
kqn ;
dt

where q is the quality of a product, k the rate of degradation


depending on environmental conditions like temperature, and n a
power factor called the order of the reaction, determining
whether the reaction rate is dependent on the amount of quality
q left. Most often, power factor n will have a value of either 0 or 1

A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

423

temperature Ti), leading to


q q0 

m
X

ki ti ;

i1

and
"
q q0  exp 

m
X

#
ki ti ;

i1

for zero-order reactions, and rst-order reactions, respectively.


Substituting the equations for the rate of quality degradation (2),
we get:
Fig. 1. Illustration of quality degradation of food products.

q q0 

m
X

k0 ti  expEa =RTi ;

i1

and
(zero-order and rst-order reactions), leading to linear or
exponential quality decay. For example, for food products where
quality degradation depends on microbial growth (e.g., fresh meat
and sh), the quality degradation follows the rst-order reactions
as illustrated by line B in Fig. 1, while other food products (e.g.,
fresh fruits and vegetables) follow the zero-order reactions
illustrated by line A (Labuza, 1982).
Quality prediction of food products is a complex task, due to
the range and dynamics of product characteristics and storage
conditions. Numerous models have been developed for specic
food products (e.g., McDonald and Sun, 1999; Lukasse and
Polderdijk, 2003), and some are even included in widely used
decision support software (e.g., Dalgaard et al., 2002). Regarding
the range of product characteristics, it should be noted that most
approaches are based on the fact that for a given product there is
normally one leading quality characteristic that can then be used
in quality prediction models.
Obviously, temperature is an important factor in controlling
product quality in supply chains. The rate of quality degradation k
is therefore often based on the Arrhenius equation, a formula for
the temperature dependence of a chemical reaction. The general
form of this equation is
k k0  expEa =RT

where k0 is a constant, Ea the activation energy (an empirical


parameter characterizing the exponential temperature dependence), R the gas constant, and T the absolute temperature.
For prediction of quality levels, Eq. (1) means that we can
estimate the quality level of a product at a certain location
in the production and distribution network, based on an initial
quality (q0), and subsequent storage periods i=1,y,m with
time interval ti and degradation rate ki (depending on the

"
q q0  exp 

m
X

#
k0 ti  expEa =RTi  ;

for zero-order and rst-order reactions.


Using these equations, we can calculate the expected quality of
food products after storage at given time periods and temperatures. For a given temperature, the zero-order reaction is again
linear, while the rst-order reaction is exponential, but can be
transformed to a linear relationship by taking its logarithm. In
the remainder of this paper, this is essential in reducing the
complexity of the model we are proposing. It means the quality
change during a specied time period can be determined for each
possible storage or transportation temperature, and the outcome
can be used as parameters in the production and distribution
planning model developed in this paper. For, example, for zeroorder reactions, this would lead to the following quality change
Dq for a time period with length t and temperature T:

Dqt; T k0 t  expEa =RT

For rst-order reactions, the same equation results, but in this


case it concerns the difference in logarithmic quality.

3. Modelling quality in production and distribution


Our modelling approach is based on a generic food supply
chain shown in Fig. 2. This generic supply chain is used as
it includes all main elements of production and distribution
systems: production facilities, storage or transhipment facilities,
retailers, and transportation links. We acknowledge that
for different products food supply chains will be organized
differently. For instance, fresh produce chains or catering chains
are likely to be shorter, as e.g. fresh meat products would be

Storage for certain time at certain temperatures

Storage at
production

i1

Distribution
centre

Production

Retailer

Transportation for certain time at certain temperatures


Fig. 2. Generic food supply chain structure.

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A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

Duplication of nodes for


each possible temperature

P2

D1

D2

...

P..

Production sites (P)

T = TS

T = T1
D1

P1

...

D1

R1

R2

...

...

D..

R..

Distribution centres (D)

R..

Retailers (R)

Fig. 3. Network representation of the food supply chain.

distributed directly from the producer to retail outlets. Frozen


products or processed products often have an additional stage, as
producers will normally deliver these products to a distribution
centre, from which they are subsequently distributed to retail
outlets. The important thing is that these different supply chains
can easily be modelled based on this generic chain.
In the generic chain, some stages perform both production and
storage tasks, whereas other stages perform only storage tasks. In
this paper, we consider the distribution planning for a single
product and assume that the retailers demand patterns for the
product are known. We do not include inventories at the retailers,
as these are the nal customers in our model, and they specify
certain quality requirements in their demand. Often, these
requirements are related to a remaining shelf life of the product.
The objective of the production and distribution problem is to
determine the storage and transportation temperatures throughout the chain, combined with the production quantities and
delivery paths for goods so that the total logistics cost is
minimized while satisfying both the demand and quality
requirements of the retailers. The total costs consist of: production costs, transportation costs, storage costs, cooling costs, and
waste disposal costs in cases where the food quality fails to satisfy
the quality requirement.
3.1. Integration of quality degradation and temperature control
The special feature of the food production and distribution
system is maintaining product quality in the storage and
transportation facilities. We explicitly consider this quality
degradation in the production and distribution network. Fig. 3
shows a network representation of the supply chain shown in
Fig. 2. To consider temperature control in this network, we extend
the traditional network by duplicating all nodes for different
temperature levels. In this way, we are able to have the model
determine the optimal storage temperatures. Similarly, arcs
are duplicated to be able to model different transportation
temperatures (for sake of clarity, this is not included in Fig. 3).
In Fig. 3, S is the number of temperature levels for the facilities. If
required, different sets of possible temperatures can be dened
for different storage and transportation facilities.
The temperature range used obviously has to be dened
based on the feasible temperatures for the product in question.
In addition, there are regulations about the temperature and
equipment requirements for transporting perishable products in
most countries, such as the ATP agreement that has been signed
by almost all countries in Europe, the USA and many other
countries (Panozzo and Cortella, 2008). This agreement will limit
the range of temperature levels we have to consider in our model.
Eventually, for each storage and transportation facility, only one
temperature is selected.

Furthermore, all the product ows are distinguished by their


quality level. We discretize the quality in such way that Dq at any
link of the network and for storing in warehouses for one period
in Fig. 3 are integers. We consider heterogeneous batches of
products (product quality differs between batches) delivered by
multiple producers to multiple retailers that have different
demands. Based on the description in Section 2, we can use
either an absolute quality measure or a logarithmic transformation so that the resulting quality measure degrades linearly with
respect to the time for a given temperature (as was shown by line
A in Fig. 1). That means that the quality degradation is only
associated with the storage time at a given temperature
regardless of the starting level of the food quality, which reduces
the complexity of the resulting decision model.
The quality degradation Dq is a linear function of time when
the products are exposed to the environment at a certain
temperature as mentioned in Section 2. The quality levels of the
product are subject to decrease as time goes on no matter
whether they remain in storage or are transported to other
facilities. We use minimum quality levels qi,min for all actors i in
the supply chain: producers, manufacturers, distribution centres,
and retailers. These minima are based on the minimum quality
level required by the retailers and then further propagated
upwards through the chain, based on the minimum time it would
take for a product to reach the retailer. The maximum quality
level of the product is denoted by qmax. Fig. 4 illustrates the
quality degradation in a distribution network consisting of a
producer, a distribution centre, and a retailer, where temperatures
for storage and transportation facilities are given. In the gure,
notations si and uij are used to denote the storage time at facility i
and the transportation time between facility i and j. For example,
uPD refers to the time it takes to transport the product from the
producer to the distribution centre.
Dening the range of quality levels should be coordinated with
the denition of time periods (used for transportation time and
storage time) so that the quality level degrades at least one level
for every time period (either during transportation or during
storage). This is necessary to make sure that the model is able to
trace product batches of different quality throughout the production and distribution network.
3.2. Planning horizon and transportation lead times
Next, we consider the planned lead time. The demand dit of
retailer i at time t from period 1 to the planning horizon H can in
some cases be fullled by all previous supply chain stages. If there
are no stocks in the distribution centres, then the demand must be
satised by manufacturing or production. Since it takes some time
to transport the food products to the retailers, we introduce the
maximum planned transport lead time omax at the production

A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

Storage
P1

sP

P1

Storage

D3

uPD

Transport
D3

sD

uDR

R2

Quality levels

qmax

Transport

425

qmin

t1

t2
(t1+sP)

t3
(t2+uPD)

t4
(t3+sD)

t5
(t4+uDR)

Period
Fig. 4. Illustration of quality degradation in a distribution network for given temperatures for storage and transportation facilities.

sites, similar to the planned production lead time by Spitter et al.


(2005). Hence, we consider the planning interval [1  omax, H], to
allow the production and transportation activities to begin in
period 1 omax.
3.3. Model assumptions
To facilitate the modelling, we make the following assumptions:

 The ow on the network only carries products that satisfy the





quality requirements of the retailers. Products that do not


satisfy the quality requirements of any retailer are discarded at
the end of each period (and waste costs are incurred).
The production facilities only produce products that satisfy the
quality requirements.
Quality levels of different batches can be different.
Shipments are made at the end of the periods, and are
measured in product units, which could e.g. be boxes. Here, we
also assume that related production and distribution costs can
be expressed per product unit.

R
U
N
A C NN
Q
n(i)
v(i)
Parameters:
M

omax
ai,t
fi,j,k
1
gi;k
2
gi;k

pi,q,t
wi

3.4. Notation
The following notation is introduced for the purpose of
modelling:
Indices:
i
i,j
q
k
t

Sets:
P
D

node index (for production and storage


facilities, as well as retailers),
index pair, (i,j), referring to an arc from node
i to node j,
quality index, qAQ,
temperature index, kA{1,y,S},
time index, referring to either a period or a
point in time. The period t is between point t
and t+ 1, tA{1  omax,y,H},
set of production sites,
set of distribution centres,

dj,t
qmax
qi,min
si

Dqi,k

Dqi,j,k
ui,j

set of retailers,
set of production and storage facilities,
U= P [ D,
set of all nodes: N = P [ D [ R,
set of all arcs,
set of all quality levels q, Q={1,y,B},
set of successor nodes for node i,
set of predecessor nodes for node i.
a large positive value,
maximum planned transport lead time from
production sites to retailers
production capacity for facility i in period t,
cost for transporting one product unit per
period on arc (i, j) at temperature level k,
cooling cost for facility i per period at
temperature level k,
cost for storing one product unit for one
period in facility i at temperature level k,
cost for producing one product unit with
quality level q in facility iAP in period t,
waste disposal cost for one product unit,
which is incurred when product quality
falls below the required quality level in
facility i,
demand by retailer jAR in period t,
maximal quality level for products,
minimum quality level for products in
facility iAN,
batch size in plant iAP,
quality degradation in one period for
products stored in facility iAU at
temperature level k,
quality degradation for products transported
on arc (i,j) at temperature level k,
number of periods that transportation lasts
on arc (i,j).

Decision variables:
inventory with quality level q in facility i
Ii,q,k,t
with temperature level k at the beginning of
period t,

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A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

xi,j,q,k,t

ow quantities on arcs (i,j) in period t with


temperature level k with quality level q at
the (starting) node i,
binary variable indicates whether the
facility i has temperature level k in period t,
number of batches with quality level q (at
the end of the period) required to be
produced in plant i in period t,
binary variable indicates whether the
transportation equipment on arc (i,j) has
temperature level k in period t,
amount of waste at facility i in period t.

zi,k,t
yi,q,t

oi,j,k,t

Oi,t

S
X

oi;j;k;t r1; 8i; j A A; 8t A f1omax ; . . . ; Hg;

15

k1

Ii;q;k;t r M  zi;k;t ; 8i A U; 8qA fQ jqZ qi;min g; 8kA f1; . . . ; Sg;


8t A f1omax ; . . . ; Hg;

S
X

zi;k;t 1; 8i A U; 8t A f1omax ; . . . ; Hg;

16

17

k1

si yi;q;t rai;t ; 8i A P; 8t A f1omax ; . . . ; Hg;

18

q Z qi;min

3.5. Model formulation


The quality-based multi-period production and distribution
planning problem can be formulated as follows.
X X

H
X

min

S
X
X

H
X

fi;j;k ui;j xi;j;q;k;t

t 1omax k 1 i;j A A q Z qj;min Dqi;j;k


S X
X

H
X

t 1omax k 1

H
X

1
gi;k
zi;k;t

iAU

2
gi;k
Ii;q;k;t

i A U q Z qi;min Dqi;k

wi Oi;t

t 1omax i A U

subject to
S
X

Ii;q;k;t 1

k1

S
X

Ii;q Dqi;k ;k;t si yi;q;t

k1

S
X

xi;j;q;k;t ; 8i AP; 8q A fQ jqi;min rq rqmax g;

k 1 j A f j A nijq Z qj;min Dqi;j;kg

8t A f1omax ; . . . ; Hg;

S
X

Ii;q;k;t 1

k1

S
X

Ii;q Dqi;k ;k;t

S
X
X

xj;i;q Dqj;i;k ;k;tuji

k 1 j A vi

k1

S
X

xi;j;q;k;t ; 8i AD; 8q A fQ jqi;min rq rqmax g;

k 1 j A f j A nijq Z qj;min Dqi;j;kg

8t A f1omax ; . . . ; Hg;

Oi;t

S
X

qi;min X
Dqi;k 1

k1

q qi;min

S
X
X

Ii;q;k;t ; 8i A U; 8t A f1omax ; . . . ; Hg;

xj;i;q Dqj;i;k ;k;tuji di;t ; 8i A R; 8t A f1; . . . ; Hg;

10

11

12

k 1 j A vi q Z qi;min

19

xi;j;q;k;t Z 0; 8i; j A A; 8q A fQ jq Zqi;min g; 8k A f1; . . . ; Sg;


8t A f1omax ; . . . ; Hg;

20

oi;j;k;t A f0; 1g; 8i; j A A; 8kA f1; . . . ; Sg; 8t A f1omax ; . . . ; Hg;

21

zi;k;t A f0; 1g; 8iA U; 8kA f1; . . . ; Sg; 8t A f1omax ; . . . ; Hg;

22

yi;q;t Z0 and integer; 8i A P; 8q A fQ jqZ qi;min g;


8t A f1omax ; . . . ; Hg:

23

pi;q;t si yi;q;t

t 1omax i A P q Z qi;min

Ii;q;k;t Z 0; 8i A U; 8q A fQ jqZ qi;min g; 8k A f1; . . . ; Sg;


8t A f1omax ; . . . ; Hg;

xi;j;q;k;t r M  oi;j;k;t ; 8i; j A A; 8kA f1; . . . ; Sg;

In the above formulation, the objective function (8) aims to


minimize the total costs, consisting of production costs, cooling
costs for transportation equipment, transportation costs, cooling
costs for storage facilities, storage costs and waste disposal costs.
It should be noted that we include the transportation cost based
on product volumes and distances, but also on the temperature
used, by multiplying cost factor fi,j,k with decision variables xi,j,q,k,t.
Constraints (9) enforce the inventory balances for producers, and
constraints (10) reect the inventory balances for distribution
centres. Constraints (11) cause products with quality levels
between qi,min and qi,min + Dqi,k to be transferred to waste in
variables Oi,t. Constraints (11) also make sure that there is no
inventory for products with quality level less than qi,min. These
products cannot be used anymore to satisfy the next periods
demand. Constraints (12) represent that the retailers demand and
quality requirement must be satised. Constraints (13)(15)
mean that transportation equipment must be employed and a
temperature for the transportation equipment must be selected if
there are ows on the corresponding arc. Constraints (14) are
added to enhance solution efciency, by providing additional cuts
that break symmetry. They ensure that variables oi,j,k,t are set to
zero, when there is no ow on this arc, thus making it also easier
to interpret the solution. Constraints (16) determine the inventory
under different temperature levels. Each facility can only be
operated at a single temperature level. Hence, constraints (17)
imply that one temperature must be selected for each storage
facility. Constraints (18) enforce the production capacity constraints. The remaining constraints (19)(23) are non-negativity
constraints and integer restrictions on the decision variables.

q Z qj;min Dqi;j;k

8t A f1omax ; . . . ; Hg;

13
4. Illustrative case study

xi;j;q;k;t Z oi;j;k;t ; 8i; j A A; 8kA f1; . . . ; Sg;

q Z qj;min Dqi;j;k

8t A f1omax ; . . . ; Hg;

14

In this section, we apply the modelling approach in an


illustrative case study. We look at a supply chain for bell peppers.
It consists of one production site (P1) and four regional distributions centres (R1 to R4). The production site coordinates production

A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

Table 1
Transportation times to the retailers and their quality requirements.

Table 3
The relative cost between different temperature using 2 1C as a reference.

Quality requirements (% of maximum initial quality)


80%

Temperature (1C)
Relative transportation costs (rck)

2
1

4
0.88

6
0.77

8
0.65

10
0.54

85%

Transportation time (in days)


2
R1
3
R2

600. This also means that, in terms of our mathematical model,


we are only interested in the quality levels between 600 and 750,
which reduces the number of quality levels we need to cover and
thus the model complexity.

R3
R4

Table 2
Estimated shelf life and quality degradation for peppers at different temperature
levels.
Temperature (1C)
Shelf life (days)
Quality degradation per day (Dq)

427

2
34
11

4
29
13

6
24
16

8
19
20

10
14
27

and processing of the peppers, whereas the distribution centres


are run by retailers, leading to a two-stage food supply chain.
Table 1 shows the quality requirements of different retailers
and transportation times from the producer to these retailers.
The product quality at the retailers is inuenced by the initial
product quality and by the quality changes in the supply chain.
Initial product quality can vary due to soil conditions, harvest
time, and product handling around harvest. In purchasing peppers,
the producer can select which quality to buy, but a higher quality
product will lead to higher purchasing costs. Throughout the
supply chain, quality is inuenced by controlling the storage
temperature at the producer and temperatures during transportation to the distribution centres. We choose between 2, 4, 6, 8 or
10 1C. Section 4.1 further discusses the quality degradation of the
bell peppers resulting from these different temperature options.
The planning horizon (H) is 14 days, to which a 3-day
transportation lead time (omax) is added. One time period in
the model represents one day. As it is not realistic to change the
storage temperature at the production site every day, we only
make one choice for this temperature for the entire planning
horizon (hence, in this case the index t is not required in variables
zi,k,t). For transportation, in contrast, we do have the option to
change the temperature for each of the shipments.

4.1. Quality degradation


For peppers, rmness and colour are two major factors
determining quality, market value, and shelf life. Based on Labuza
(1982), the shelf life of peppers reduces from 3 to 2 weeks when
temperature increases from 7.2 to 10 1C. Quality degradation of
fresh fruits and vegetables follows a zero-order reaction (Labuza,
1982), which means that n = 0 for Eq. (1), i.e. the quality (in terms
of remaining shelf life) is a linear function of the temperature.
Hence, we obtain the shelf life increase for peppers for a unit
temperature decrease by (3 2)  7/(10 7.2) = 2.5 days/1 1C. The
resulting shelf life for each of the aforementioned temperature
options in our case study is summarized in Table 2.
In our modelling approach quality degrades by an integer value
per day. When dening the discrete quality levels (i.e., choosing the
total number of levels), we need to make sure the scale is detailed
enough to be able to distinguish between the different temperature
options. To achieve this, we choose to use a total number of 750
quality levels for the case. The resulting quality degradation per day
for each of the temperature options is also shown in Table 2.
Finally, the quality requirements of the retailers need to be
translated into quality levels. As 100% is dened as a level of 750,
the quality requirements of 85% and 80% lead to levels of 638 and

4.2. Relative cooling cost


The cost for storage and transportation depends on the
temperature. In determining these costs, we have to take the
thermal characteristics of cooling processes into account. Neglecting energy losses, the so-called coefcient of performance (COP)
for refrigeration is calculated as follows (Wang, 2001).
COP

QL
TL

;
W
TH T L

24

where QL is the heat transferred from a lower temperature


environment to a higher temperature environment, W is the input
energy, TH and TL are higher (environment) and lower (cooling)
temperature measured in Kelvin. For example, if TH = 293 K (20 1C),
and TL =275 K (2 1C), then COP =15.3. It means that for each unit of
energy drawn from an electrical source, the coolant can absorb as
much as 15.3 units of heat from the inside of the refrigerator.
Eq. (24) also means that more electrical energy is needed for a lower
temperature. If we assume that the unit cost of electrical energy is
xed, then the electrical energy cost (cooling cost) should be
proportional to the amounts of consumed electrical energy.
We use (24) to determine the relative cost for the different
temperature options regarded in this case. If we assume the cost
of electrical energy at 2 1C is 1, then the relative cost at higher
temperatures can be calculated by multiplying the cost with the
ratio of COP values (where we use an environment temperature TH
of 20 1C =293 K). For instance, using the calculated COP at 2 1C
(15.3), and relating it to the COP at 4 1C (277 K/(293277 K)= 17.3),
we get a cost ratio of 15.3/17.3= 0.88. The results for all
temperature levels are shown in Table 3 where 2 1C is used as a
reference value.
The relative costs rck in Table 3 are multiplied with the
relevant transportation cost parameter cij to obtain the cost
parameter for the different temperatures, i.e., fijk = cij  rck.
Above, we have presented the data most closely related to our
research contribution, i.e. the modelling of quality degradation
and temperature levels in supply chains. The full instance data are
similar to data required for standard supply chain models, and
would take up a lot of space to report. They are therefore available
from the authors upon request.

4.3. Results
The model was implemented in ILOGs OPL Studio in
combination with the CPLEX 10.2 optimization software. The test
runs were performed on a 2.33 GHz Pentium 4 PC (with 1.95 GB
RAM). The network resulted in a problem instance with tens of
thousands constraints and a few ten thousand variables (around
1500 integer) and was solvable well within limits acceptable for
decision support in the industrial practice.
In our experiment, we illustrate the impact of different cooling
costs during transportation. For this purpose, we dened
fijk = a  cij  rck, where we varied the parameter a between 0.15

428

A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

Table 4
Transportation temperature in degrees Celsius for shipments from the producer to the retailers in the specied periods for a =0.25 (note: not all periods require shipments
to the retailer).
To

Period

R1
R2
R3
R4

Average

2

1

10

11

12

13

14

6
4
4
4

4
4
4
2

6
4
4
2

4
2
4
2

4
2
2
4

6
2
2
2

4
4
2
4

4
4
2
4

4
4
4
2

4
2
2
4

6
2
4
2

6
2
8
4

6
2
4
4

5.00
3.29
3.43
3.00

Table 5
Transportation temperature in degrees Celsius for shipments from the producer to the retailers in the specied periods for a =0.75 (note: not all periods require shipments
to the retailer).
Period
2

1

10

11

12

13

14

10
8
10
8

8
8
10
8

8
8
10
8

8
8
8
8

8
8
10
8

10
8
8
8

8
8
8
8

8
8
8
8

8
8
8
8

8
8
8
8

10
8
8
8

10
8
8
8

10
8
8
8

Initial quality - %

94

92

90

88

86

8.71
8.00
8.57
8.00

25

10

Average initial product quality


Average transportation temperature

Number of batches

R1
R2
R3
R4

Average

Temperature - C

To

20
15
10
5
0

0.2

0.4

0.6

0.8

Transportation cost factor -


Fig. 5. Average initial product quality and average transportation temperature for
different transportation cost factors a.

and 1 to generate different scenarios. For a = 0.25, we obtain the


temperature levels for the shipments shown in Table 4.
The variety of the temperatures for the different periods is the
result of a trade-off between all different cost factors, but the
results clearly show that both quality requirements of the
retailers and the duration of the shipments have an impact on
the temperature levels.
Shipments to retailers with higher quality requirements (R3
and R4) take place at lower temperatures than those to retailers
with lower requirements (R1 and R2). Similarly, shipments to
retailers which require longer transportation time (R2 and R4) are
done at lower temperatures than those to those retailers which
require less transportation time (R1 and R3).
For a =0.75, i.e. for higher cooling costs during transportation,
the results change signicantly, as is shown in Table 5.
The increasing shipment temperatures are the result of cost
savings on the now more expensive transportation. The required
quality at the distribution centres is now achieved through an
increase in initial product qualityincluding the associated
increase in the production costs. In this high transportation cost
scenario, the temperatures are more similar for the different
retailers. The differentiation on quality level due to retailer
requirements and duration of shipments is created by the initial

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95
Initial product quality (%)
Fig. 6. Number of product batches for each initial product quality for scenario
a = 0.25.

product quality variations, rather than a differentiation of


transportation temperatures.
Fig. 5 summarizes the results by showing the average initial
product quality and the average transportation temperature for
ve different transportation cost scenarios. It clearly shows that
the increase in transportation temperature needs to be
compensated by an increase in the initial product quality of the
product.
Only a limited number of initial product quality levels are
actually used. For a = 0.25, the number of product batches of each
quality level acquired are shown in Fig. 6. The most common
initial product quality levels are just below 85% and 90%.
Practically, this means that the producer could choose to obtain
part of their products through cost-effective medium- to longterm contracts based on these quality levels.

5. Conclusions and further research


This paper presented a mixed-integer linear programming
model for the planning of food production and distribution with a
focus on product quality, which is strongly related to temperature
control throughout the supply chain. It is based on a generic food

A. Rong et al. / Int. J. Production Economics 131 (2011) 421429

supply chain conguration and a general way of describing


quality degradation of food products, so as to facilitate application
in a wide variety of food industries. The approach combines
decision-making on traditional logistical issues such as production volumes and transportation ows with decisions on storage
and transportation temperatures. The model has been applied in
an illustrative case study, to show: (i) how the generic model can
be implemented in a specic situation, (ii) how the product
quality can be modelled on a discrete scale, and (iii) what kind of
results are obtained from the model.
The main contribution lies in the inclusion of product
quality in food supply chain modelling, and in the differentiation
of product ows based on product quality. In this way,
the important aspects of managing product quality and controlling the temperature can be integrated in decision-making on
production and supply chain management. The model presented
is therefore a useful tool in the operation of production
and distribution systems in the food industry. As presented,
the model aims to support tactical mid-term decisionmaking, illustrated by a discretization of the planning horizon in
relatively short time periods, which is necessary to include the
changing quality over time. We do however feel that the model
might also be useful in relation to the design of food supply
chains, even though it does not explicitly model such strategic
decisions. As part of a scenario analysis, in which a variety of
supply chain designs and possible future demand patterns are
considered, the model could be used in a rolling horizon scheme
and aid in evaluating performance in terms of costs and product
quality.
Further research could focus on the application of the model in
a wide range of food industries, and the development of more
detailed industry-specic models. Next to practical outcomes in
terms of decision support, this application will allow us to further
study the performance of the model in real-life settings. The
inclusion of more advanced quality decay models which analyse
in more detail the impact of temperature uctuations is another
possible extension of this work.
In this paper, we considered a single product in the production
and distribution network. Future work could therefore
also include the consideration of multiple products. This will
however have to include quality degradation models for each
of these products. Also, interactions between the different
products might then also have to be taken into account, as is for
instance the case with fruits and vegetables (Broekmeulen, 1998).
Finally, we see that the optimization model is quite large for a
fairly small application. To make the model solve large instances,
aggregation and simplication techniques might have to be
developed.

Acknowledgements
The authors would like to thank the FoodDTU research centre
(www.fooddtu.dk) at the Technical University of Denmark for
partial funding of this research project. In addition, the rst
author thanks FCT (Science and Technology Foundation, Portugal)
for partial funding of this research through the program POCI
2010. Also, the second author would like to acknowledge support
from a H.C. rsted postdoctoral fellowship from the Technical

429

University of Denmark. Finally, we acknowledge Sara Dolcetti for


her assistance in carrying out the numerical experiments.
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