The setting of risk prevention threshold of the perishable product supply chain with retailer’s uncertain risk preference

Xiaotong Guo and Yong He ()
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Xiaotong Guo: Southeast University, School of Economics and Management
Yong He: Southeast University, School of Economics and Management

Annals of Operations Research, 2025, vol. 355, issue 3, No 10, 3049-3079

Abstract: Abstract Uncertainty in demand, product deterioration, and sales termination due to food safety concerns can lead to substantial profit losses for members of the perishable product supply chain. The implementation of effective risk mitigation measures is crucial for maintaining the integrity of the fresh perishable product supply chain. Taking into account the retailer’s aversion to uncertainty, we have developed a mean-variance model to investigate the retailer’s risk prevention strategies, specifically the setting of import termination thresholds. Our analysis indicates that establishing an import termination threshold can be advantageous for both the retailer and the supplier, provided it is set within an optimal range. The retailer determines the import termination threshold by weighing uncertainties in demand, product deterioration, and sales termination risks. Furthermore, the retailer’s risk tolerance for these elements is complementary. Both the product delivery schedule and the trading period have a direct impact on the retailer’s decisions regarding the import termination threshold and profits, as they influence the rate of product deterioration. However, their effect on the supplier’s profits is nonmonotonic. When the product’s non-deterioration rate is high or the trading period or product delivery time is short, the retailer tends to set a lower import termination threshold. Numerical results further reveal a misalignment between the retailer’s and supplier’s preferences concerning market base, primarily due to the distinct risks they face. While the retailer generally benefits from higher market demand, the supplier may experience negative effects under certain conditions. These findings offer guidance and strategies for members of the perishable product supply chain to mitigate various risks, thereby enhancing profitability and sustainability during operations.

Keywords: Perishable product supply chain; Threshold; Risk preference; Mean-variance (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10479-025-06820-4

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