Study on Optimizing Inventory to Minimize Waste in the Fresh Produce Supply Chain

Abstract: The increasing demand for fresh produce, particularly greens, presents unique challenges in inventory management due to their short shelf life and susceptibility to spoilage. Inefficient management often results in significant waste, leading to financial losses for retailers and increased environmental burdens from the disposal of spoiled goods. Despite various strategies being employed in the agri-food sector, gaps remain in understanding how to optimize inventory levels to minimize waste at the retails level while maintaining high service levels for customers. This research aims to develop an inventory management model tailored to fresh produce that can mitigate these issues by balancing stock availability and minimizing wastage, particularly in large retail shops. To address the research problem, a mixed-integer linear programming (MILP) model was developed, focusing on three service levels—90%, 92%, and 95%—to evaluate the trade-offs between customer satisfaction and total inventory costs. The model incorporates key constraints, including stock balance, shelf-life limitations, and demand satisfaction. The model was validated using actual data, including stock, sales, and wastage records for the month of August, 2024. The objective function aimed to minimize total costs, encompassing holding costs, wastage, and lost revenue. The findings indicate that higher service levels, while reducing stockouts, significantly increase costs due to excess inventory and waste. The most cost-effective solution was observed at the 90% service level, which balanced waste reduction and customer satisfaction. The study also emphasizes the importance of integrating total cost reduction and minimize wastage. Future work should focus on incorporating consumer behavior patterns and extending the model to multi-echelon inventory systems, which include both distribution centers and retail outlets, to capture a more holistic view of the supply chain.