Supply Chain Consolidation and Cooperation in the Agriculture Industry

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The objective of this research is to construct models and design algorithms to (i) optimize the transportation and inventory costs of an agricultural supply chain with small suppliers, perishable product, and a consolidation center, and (ii) allocate the costs of consolidation to the suppliers in a way that encourages participation and sustained cooperation. In particular, the investigators will consider models with small suppliers of quickly perishable agricultural products who would benefit from the economies of scale resulting from consolidation. Models with successively higher levels of consolidation, integration and complexity will be considered, starting with a system that only allows direct shipping through a consolidation center, up to a system that allows routing between the suppliers, the customers, and the consolidation center. Exact methods as well as various heuristics will be developed that take advantage of the natural decomposability of these models. In addition, the investigators will study the associated cooperative game-theoretic problems for these models, focusing on computing fair cost allocations with subsidies or incentives if necessary. The investigators will work closely with the California Cut Flower Commission, which represents California flower growers, in order to develop novel consolidation schemes and cost allocation methods that are both feasible and beneficial in practice.If successful, this research will result in novel systems for transportation and inventory consolidation in agricultural supply chains with many small suppliers that (i) reduce the total transportation costs for all growers by exploiting economies of scale and full truckload rates, (ii) are simple enough for efficient solution and mostly decentralized control, and (iii) allow for fair cost allocation schemes. In addition, solving these models for transportation and inventory consolidation will require novel algorithmic approaches, combining techniques from transportation science, discrete optimization, and cooperative game theory.