Logistics network design for perishable products with heterogeneous quality decay

The duration of logistics operations, as well as the environmental conditions during these operations, significantly impact the performance of a logistics network for fresh agricultural products. When durations or temperatures increase, product quality decreases and more effort is required to deliver products in time and with the right quality. Different network designs lead to different durations and conditions of transport, storage, processing, etc. Therefore, when making network design decisions, consequences for lead time and product quality should be taken into account. As decay of perishable products, for instance food, is often not uniform, heterogeneity in product quality decay also has to be considered. The aim of this paper is to show how product quality decay as well as its heterogeneity can be integrated in a network design model. A new mixed integer linear programming formulation is presented, which positions stocks and allocates processes to maximise profit under quality constraints. It is applied to several test instances from the horticultural sector. Results show that different levels of decay lead to different network structures. Changing decay rates due to processing particularly affect the level of postponement. Heterogeneity in product quality causes a split in product flows with high and low product quality. All in all, it is shown that heterogeneous product quality decay should be taken into account in network design as it significantly influences network designs and their profitability, especially when the supply chain includes processes that change the level of decay, and product quality differences can be exploited in serving different markets.