Shipment Monitoring, Allocation, and the Impact on Food Waste

Often advocated for the potential to reduce waste in fresh produce supply chains, sensor technologies enable firms to monitor the condition of each product unit and allocate them to markets at different transportation distances, thereby matching units with shorter shelf lives with closer markets. In this paper, we consider a firm purchasing and transporting a fresh produce product for sale in two destination markets. Postharvest processes cause a proportion of the product to be in risky condition, potentially becoming unsalable (“spoiled”) due to shelf-life deterioration during transportation. With monitoring technology, the firm first determines a purchase quantity and then decides how to allocate each unit (in either good or risky condition) between markets. We characterize the optimal allocation policies, which can be used to efficiently determine the optimal purchase quantity. Our analysis shows that such technology may inadvertently increase total waste by inducing larger purchase quantities; this increase is often, but not always, accompanied by a lower waste rate and improved distribution efficiency. As firms increasingly adopt monitoring technology for shipment allocation, additional policy and managerial attention may be required. Improvements in postharvest processes can strengthen the waste-reduction benefits of monitoring technology. Firms seeking to maintain their sustainability goals can capture most of the profit gains from monitoring by carefully moderating increases in purchase quantities. This paper was accepted by Jeannette Song, operations management. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2024.07382 .