Variability Propagation in Perishable Product Supply Chains

45 Pages Posted: 13 Sep 2023

See all articles by Xiaoyue Yan

Xiaoyue Yan

Cornell University - Samuel Curtis Johnson Graduate School of Management

Elena Belavina

Cornell SC Johnson College of Business

Date Written: August 24, 2023

Abstract

Demand variability and its propagation in the supply chain have played a key role in recent shortages, inflation and turmoil. Managing demand variability is essential to minimizing costs and delivering reliable supply. In perishable-product supply chains it is also key to reducing food waste and carbon emissions. This study provides the analysis of variability propagation in perishable-product supply chains. We build and calibrate a two-echelon perishable-inventory model, showing that the nature of variability propagation in perishable-product supply chains is strikingly different from that in well-studied durable-product supply chains. In particular, we find that (i) product perishability is a novel, hitherto unknown driver of the much-examined bullwhip effect (upstream variability amplification), (ii) surprisingly, perishability can also lead to upstream variability attenuation, an anti-bullwhip effect. Our data-driven model calibration reveals a great variation in the degree of variability amplification across different products resulting from more/less favorable combinations of the product and market characteristics. Products with more extreme (high or low) purchasing price, replenishment cost, mean of product expiration time, and standard deviation of buyer demand exhibit higher variability amplification. High mean of buyer demand and standard deviation of product expiration time also yield higher amplification. Finally, we show that the buyer's order quantity modulates the extent of the upstream variability amplification, and as a result, the supply chain partners could attempt to identify contracts that coordinate on buyer's order quantities to limit variability amplification. This could lead to overall less food waste (3-6%) and higher profits (2-10%) for the supply chain.

Suggested Citation

Yan, Xiaoyue and Belavina, Elena, Variability Propagation in Perishable Product Supply Chains (August 24, 2023). Available at SSRN: https://ssrn.com/abstract=4550255 or http://dx.doi.org/10.2139/ssrn.4550255

Xiaoyue Yan (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14850
United States

Elena Belavina

Cornell SC Johnson College of Business ( email )

New York, NY 10044
United States

HOME PAGE: http://belavina.com

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