Management of Risk in Cold Chain

Teo Zhen Jia Aan

Abstract

In the cold supply chain, products are more susceptible to damage. It is imperative that operators recognize this trait and take proper measures in ensuring that their shipments are managed adequately both from a cost and risk perspective. It is therefore insufficient to simply use cost as the main consideration or driver in the planning and execution of logistical operations in the cold supply chain.

In this paper, two main problems are explored, the mitigation of risk through deconsolidation of shipment and the courier selection problem. In both cases, they are presented in a multi-objective or multi-criteria model, optimizing both the cost and risk in a balanced manner or according to the decision maker’s (DM) preference. For deconsolidation, a bi-objective mixed integer programming (MIP) model is proposed where trade-offs have to be conducted against risk and cost. The solution and Pareto frontier are generated using Microsoft Excel Solver. To take advantage of certain assumptions used in the model, a simplified version of the model is utilized where only one item is considered at a time to greatly enhance the speed at which results can be obtained for larger item lists.

In courier selection for a fresh food company, a criterion is proposed and AHP is used in identifying prospective suppliers of courier services towards a cold supply chain. Subsequently, linear programming (LP) is used to determine the volume to contract to each individual supplier in the event of constrained supply from each individual vendor. Sensitivity analysis is conducted to determine the points where contracting decisions change as well as analyzing the competitiveness of the presented alternatives.