Akkerman et al. (2010) present an excellent review of research in the area of food distribution management. Some of the key points mentioned in the review are presented here -
There are three key considerations in managing food supply chains: (i) Distribution Network Design; (ii) Distribution Network Planning; (iii) Transportation Planning
Distribution Network Design
In food industry profit margins can be quite low and distribution operations constitute a significant portion of total supply chain costs. Hence, it is important to make appropriate levels of investment of time and money on network design decisions. Design food supply chains for products that have good quality, are not expensive and are environmentally friendly can be challenging. The network design significantly affects the eventual safety of the food product, as the design determines the number of actors, and the extent to which products are dispersed through the network. For instance, the design of the network influences the time a product is subject to quality degradation during distribution. The design of distribution networks also has a strong impact on sustainability since the distance products have to travel to reach the final consumer as well as the transportant method used impact the carbon footprint of the product. For food service chains, the aim is often to pursue a low stock level or a no-stock overnight policy in distribution centres, and to frequently ship in smaller amounts with high variations in demand. This will often also affect the length of the chain: direct delivery from the producer to the caterer is, for instance common for these products. Another typical aspect found in foodservice systems is that production activities are not always confined to the initial food manufacturing stage, as it is often the case that additional production steps take place at the caterer (e.g., final meal assembly and preparation).
Distribution Network Planning
Distribution network planning concerns mid-term decisions related to fulfilling demand (or forecasts) on an aggregated level. Here, the distribution network is a given, but the focus is on achieving efficiencies in managing distribution as an integrated system. In comparison with distribution network design, distribution network planning requires more detailed modelling of production and distribution. Most importantly, a time dimension is added. In optimization models, the time horizon is discretized into periods which are linked through inventory, i.e. food is produced in one period and distributed and consumed in a later period. This may be an efficient way to, for instance, cover a peak in seasonal demand or achieve efficiencies in distribution. This also means that most of the decision-making on distribution is integrated with decision making on production and inventory. An examination of distribution network planning can be categorized into three kinds: Aggregate Flow Planning, Distribution Frequency Determination, Miscellaneous.
Modelling approaches in aggregate flow planning differs from the network design problems in that it is important to incorporate the time dimension and the possibility of keeping product in inventory between periods. A general model for distribution network planning uses continuous decision variables to decide on the product flows in the distribution network for each time period and the inventory levels at the various locations are taken into account. Typical other model constituents include inventory balances and demand coverage constraints. In terms of objectives, typically the focus is on financial aspects, occasionally combined with customer-related aspects such as service levels or flexibility. An interesting aspect in relation to modelling food production systems is the distinction between processing a certain quantity of a food product and packaging a certain SKU. Processing and packaging activities need to be treated separately. This means that next to inventory balance constraints, there are also constraints necessary to balance processing and packaging. It might be important to plan for return shipments (e.g. in soft drink bottles) and to consider not only the improved efficiency production and distribution, but also to facilitate rescheduling during the season to account for changing production rates which may be due to varying harvesting volumes or qualities (e.g. in sugar production and distribution). Setup time considerations also play an important role in food network planning (e.g. set up required to produce different types of sugar). It is important to include product quality degradation in the network planning models as well, both in terms of a limited storage time and in terms of a decreasing value of the product over time (based on a linear decrease during the shelf life). Using an index to keep track of the harvest period, it is possible to track the shelf life. In a typical aggregate flow planning model this leads to the revision of the demand coverage constraint to only include products that have been harvested in the most recent periods (depending on the maximum number of periods the product can be stored). Perishability can also be modelled by a maximum number of periods the product can be stored by adding a constraint to make sure that product inventory in distribution centres is not used to cover the demand after having been stored beyond the specified maximum number of periods.
Delivery frequencies refer to a fixed pattern of deliveries to customers. Often, such recurring patterns are fixed for a reasonable time period, as that facilitates retailers/caterers to plan their activities around that. Therefore, the decisions on how often and when exactly customers will get deliveries are made on a tactical level. In the determination of delivery frequencies, one need to consider whether customers get deliveries once or twice a week, and on which day(s), taking into account that the workload of weekdays should be reasonably balanced. Different types of products - for instance, products that require chilled, frozen or ambient distribution - require their own vehicle type. This also need to be explicitly considered to focus on cost minimization, while making sure the shelf life of the different product classes is considered in the resulting time between deliveries.
Miscellaneous planning approaches could involve considering optimal procurement plans for a distribution system of temperature-sensitive products, which have a distinct seasonal demand pattern, but are supplied throughout the year. Further, the plan should consider uncertainty in the actual receipt quantity after ordering. Planning approaches also can consider minimizing the quality loss of the storage assignment plan developed by assigning products to the different temperature zones in the warehouse. Further, assignment planning could consider interaction between products in terms of their quality degradation. Planning can consider refrigeration power used and processing time before distribution so that the product temperature can be adjusted in combination with distribution decisions, with the objective to deliver the product at a certain time and a certain temperature. The main focus is on the impact of use-by-dates, customer selection behaviour in stores (steering the customer towards buying the older products) and lead time reduction in the distributionchain.
Transportation Planning
Transportation planning concerns the short-term planning of the distribution operations and mostly deals with the planning of deliveries to different customers. Transportation plays a key role in today’s economies, accounting for up to two-thirds of the total logistics cost. Moreover, it also has a major impact on the level of customer service. Transportation planning takes place in a highly dynamic environment requiring frequent re-considerations of previously made decisions.Typical decisions on this decision level are the details of delivery routes: at what exact times, by which vehicle, and in what sequence customers will get their products delivered. In addition, also warehousing decisions may have to be made on the operational level, such as the assignment of inbound and outbound trucks to dock doors. For certain food products, international agreements have been made to regulate the transportation of chilled and frozen foods. the transportation of food products requires different temperature levels. A vehicle may be divided up into multiple compartments with different temperature control.
Transportation planning level mainly encompasses contributions related to extending the Vehicle Route Planning applications to the food industry. For instance, one could include time windows since in many food related situations the shipments need to reach early in the morning. One could consider the distinction between different types of vehicles, such as vehicle capacities, the potential use of a trailer, and different refrigeration capabilities. Time-dependent travel times, which are becoming more and more relevant to today’s busy road networks, could be part of the transportation planning. The difference in travel times between rush hours and non-rush hours can be significant and often needs to be taken into account. In order to explicitly model product quality, Transportation planning could consider the quality of products by considering a linear relationship between quality and transportation time. An interesting factor that can be considered in transportation planning is how often the temperature-controlled cargo hold has to be opened since these temperature disruptions negatively affect the food product. Another interesting characteristic, that can be considered is the use of compartmentalized trucks to distribute different products at different temperatures. Transportation planning could also deal with the operational scheduling of trucks at a cross-docking terminal. At times the frozen foods cannot be stored since it would lead to defrosting and product degradation. This means that the inbound and outbound operations are strongly connected and should be synchronized.
Keeping quality during transportation of foods is a challenge for food distributors. Often, a product would be considered completely perished at a certain quality level. Because initial quality status might not be easily detectable, it can be hard to estimate the remaining shelf life in some cases. Related to this is an effort to improve coordination between production and transportation planning, allowing for better quality control. Transportation planning need to identify efficient ways to improve safety measures and to reduce the impacts of safety problems. Several approaches try to utilize driver knowledge by assigning certain groups of customers to the same driver. Indirectly, this is a way to increase food safety, as the driver’s knowledge would also include information of food control systems used by the customer (e.g., temperature checks and sampling forquality control). Also, the development of methods that use or improve the traceability of foods in the chain could be one way to improve the safety of foods. Transportation planning could consider the dispersion of raw materials in the production and distribution systems.
In transportation planning oftern involves reverse flow, ranging from empty containers or boxes in the retail industry to bowls and plates in the food service industry. Including these flows can be very useful in relation to sustainability and could,for instance be used to evaluate the impact of using recyclable packaging material.
Source: Akkerman, R., Farahani, P., Grunow, M. 2010. Quality, safety and sustainability in food distribution: a review of quantitative operations management approaches and challenges. OR Spectrum, 32: 863–904