Tackling food waste in the agri-food supply chain: the impact of a flexible Minimum Life on Receipt (MLOR) rule

Addressing food waste is a critical issue in the Food Supply Chain (FSC). Food waste can arise at every stage of the food supply chain, influenced by the actions of many different players. In distribution (wholesale and retail), quality standards significantly drive food waste at the supplier-retailer interface. A common approach employed by grocery retailers to manage perishable food is the Minimum Life on Receipt (MLOR) rule, which imposes the minimum remaining shelf life a food product must have upon delivery from the producer to the retailer. Typically, this rule is set by retailers and fixed at around 66% of the product's total shelf life. This work proposes an innovative approach, based on a flexible MLOR rule, to manage the interaction between the producer and the retailer in a two-echelon food supply chain of perishable products with a short shelf life, aiming to evaluate the impact of this approach on the profits and waste in the perishable FSC. The proposed interaction is modeled using a Stackelberg game, where the retailer is the leader and the producer is the follower, analyzing a single retailer and producer over three periods for a perishable product with a three-day shelf. The problem is first solved using a centralized optimization model. Subsequently, two decentralized optimization models are developed for comparison: one for the retailer and one for the producer. The focus is on providing the retailer with an economic incentive to implement a flexible MLOR rule, allowing for a lower MLOR value. To deepen the analysis, comparisons are made with the fixed MLOR rule. The models incorporate a discount strategy that allows the adoption of the flexible MLOR rule. This strategy provides a producer-to-retailer discount and a retailer-to-consumer discount for products delivered and sold with a shorter remaining shelf life than required by the fixed MLOR rule. Computational results suggest that the flexible MLOR rule combined with the discount strategy effectively maximizes total supply chain profits. Both the retailer and the producer are expected to benefit from transitioning to the proposed flexible rule. Collaboration emerges as a key factor in optimizing the supply chain, with food surplus reduction appearing more related to the supply chain's power structure than to the MLOR rule itself. This work underscores the importance of considering the retailer’s power when modeling such problems and highlights the effectiveness of discount strategies in optimizing the PFSC. The findings provide innovative insights into the impact of a flexible MLOR rule, offering practical implications for producers and retailers and suggesting directions for future research.