Proposing a Robust Optimization Model for Sustainable Supply Chain of Perishable Dairy Products

This paper aims to design a three-level sustainable dairy supply chain under uncertain conditions. Mixed-integer nonlinear programming proposed to optimize the total costs taking into account the environmental and social considerations of a multi-period and multi-product chain applied to a dairy company. The delivery time and the first-in-first-out (FIFO) policy of the products are of particular importance in the proposed model.

Design/methodology/approach: 

A dairy supply chain in Iran investigated as a real case study and the authors considered various numerical experiments, and evaluated the developed model. The primary sources of data used in this study were from the Pak Company. The suggested mathematical model coded in the GAMS 2017 software. Due to the uncertainty of economic parameters and demand, a robust-heuristic optimization approach used to solve the proposed model.

Results indicated that the values of the objective function were close together in the deterministic and robust conditions. This finding outlined the proper performance of the model under uncertainty.The outputs of the three solution methods (MINLP, MILP, and the heuristic method), indicated a higher heuristic approach performance regarding the two other approaches based on the value of the objective function and the time to solve the problem. Besides, based on the sensitivity analysis, the objective function displayed a direct relationship with the demand change, and as demand increased at different levels of uncertainty, costs increased either. Furthermore, the impact of product life cycle on cost target was different and in each scenario, increasing product lifespan led to reduced costs of the supply chain with different scenarios.

Research limitations/implications: 

The most significant research limitations were the lack of issues related to production planning such as integrated production strategies and overtime, consideration of equal volume and weight capacity for vehicles, and integration of three aspects of sustainability in a goal function. Studying issues related to production planning, including production under different strategies of integrated production and overtime; the use of diverse and heterogeneous vehicles and the selection of a suitable one for transporting raw materials and products; multi-objective mathematical modelling; and the development of meta-heuristic algorithms to solve the model are suggestions for future research.

Practical implications: 

According to the results, conducting robust models can lead managers to make integrated decisions in uncertain situations. They can decide about the optimal flow of materials in the production of flexible products in a dairy supply chain. The perishability of products (especially products with a short shelf life) adds the complexity of inventory. Therefore, managers can minimize inventory costs by considering the exit issuance system in the order of product entry. Besides, if the company attempts to move to the triple bottom line evaluation of economic, environmental, and social performance, it can use the proposed structure and research solution model.

Social implications: 

The results of the model presented to the meeting of the company's board of directors. Since the proposed model provides a framework for measuring social responsibility, highly recognized by managers, and all agreed on its applicability to the company. This model creates values that lead the company to move towards social responsibility, from which it was far in recent years. Due to the various lifespan of products and their importance in environmental pollution, production managers in the dairy supply chain should adopt appropriate decisions in the production system with highest durability and minimal environmental pollution, which will lead to economic growth in this industry.

Originality/value:

 Compared to previous studies, this study is one of the first quantitative studies wherein, a multi-level/multi-product supply chain considered in the dairy industry.In this paper, the social costs of sustainability such as job creation cost for individuals, layoffs, and lost working days simultaneously investigated concerning economic and environmental perspectives in the uncertain environment (demand, transportation costs, production costs, holding costs, and capacity of facilities considered as uncertain parameters). Since dairy products widely used in delivering food in the daily diet plan, due to the risky distribution of dairy products, the authors recognized the loss of quality and expiry date of products in the proposed model. Due to the high demand for dairy products, subjects such as time for delivery, and first-in-first-out (FIFO) policy of products were of particular importance in the proposed model.