Strengthening the supply chain for perishable products

For a business to succeed, its supply chain management system must work with a high degree of efficiency. More so when the products it deals in are perishable — like milk, meat, or agricultural produce.

Himanshu Shrivastava, a researcher with the IITB-Monash Research Academy, is working on a project titled, ‘Modelling and Simulation of an Integrated Supply Chain under Risk’ which, as the name suggests, examines an integrated supply chain network for perishable products under disruption risks and uncertain demand.

A supply chain is a complex system of organisations, people, activities, information, and resources involved in transporting a product or service from supplier to customer. It is that part of the business which ensures that the customer gets the correct product in the correct quantity at the correct location at the promised time. The costs associated with the supply chain form a major portion of the total cost incurred by a business, therefore any cost saving in the supply chain is very significant.

Says Himanshu, “We aim to determine an optimal network structure and a suitable distribution strategy for perishable products under uncertain environments, which minimises the total cost of the supply chain. The overall objective is to help the firm make decisions under uncertain environments.”

In existing studies, most mathematical models for supply chains assume that transportation links and supply chain facilities will not fail, reveals Himanshu. However, in reality, such links and facilities are subject to various disruptions. Besides, few supply chain models give consideration to the diminishing value of the product. Perishability of the product adds more complexity to the supply chain, as perishable products are more vulnerable to economic shocks and environmental changes. Therefore, supply chain network design and optimisation under disruption is of paramount importance in the case of perishable goods.

In the course of this project, Himanshu plans to quantify the effects of disruptions in the supply chains of perishable products, and thus enable decision makers to develop better disruption management strategies.

“The main motivation for our research comes from a real-life case problem from the milk industry,” he reveals. “Decision makers may have different approaches to tackle risk. Some are risk-averse; others, risk-neutral. We have therefore proposed two types of policies for decision-making. One is a risk-neutral policy, in which the expected total cost of the supply chain is minimised, while the second is risk-averse, in which the worst-case cost of the supply chain is optimised. Our research will be of use to industries dealing in perishable products that encounter disruption problems in their transportation routes as well as at the facilities.”

Figure 2. The supply chain model in a nutshell

The IITB-Monash Research Academy is a collaboration between India and Australia that endeavours to strengthen scientific relationships between the two countries. Graduate research scholars like Himanshu study for a dually-badged PhD from both IIT Bombay and Monash University, spending time at both institutions to enrich their research experience.

Says Prof Murali Sastry, CEO of the Academy, “According to a report, supply chain disruptions cause a reduction of approximately seven per cent in the share price of the affected companies. A major example was the disruption in 2014 caused by Typhoon Halong in South-West Japan which reportedly had a revenue impact of US $ 10+ billion. This just goes to show how critical the work being undertaken by researchers like Himanshu is.”

So, the next time you see farm fresh veggies in your local supermarket, you know who to thank!