In-transit perishable product inspection Chelsea C. White III, Taesu Cheong ⇑ School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, GA 30332, USA article info Article history: Received 9 March 2011 Received in revised form 20 June 2011 Accepted 31 July 2011 Keywords: Markov decision processes Cold supply chain Perishable freight transportation abstract We determine the value of monitoring perishable freight in-transit for a single vehicle trav- eling from an origin to a destination. We develop a computationally practical approach for determining the optimal expected cost function and an optimal policy, based on an infinite horizon partially observed Markov decision process model. Structural properties of the optimal expected cost function and optimal policy are determined. These results can lend insight when deciding whether to acquire the capacity to monitor freight status in transit and what actions to take, based on the data from the in-transit monitoring, that optimally increase expected supply chain productivity. Ó 2011 Elsevier Ltd. All rights reserved. 1. Introduction A significant portion of freight moved nationally and internationally is perishable. 1 Such freight is typically transported and stored in temperature controlled trailers, containers, and warehouses, which are part of the cold supply chain. However, cold supply chains are only partially successful in insuring perishable freight arrives at its destination fresh. 2 There are a variety of ways of improving the productivity of cold supply chains; we mention two. One way is to improve the likelihood that a perishable is kept at a temperature within its temperature range during transport and storage. Another way is to base the real-time control of the cold supply chain on real-time data resulting from monitoring the state of the product during transport and storage. With respect to this second approach, which is the focus of this paper, there may be advantage in knowing when freight in-transit materially degrades. For example, consider perishable freight being transported from South America to Miami and then to its final destination, Chicago. Assume that the freight perishes in-route between South America and Miami. If the state of the freight is monitored in Miami and it is determined that the freight has perished, then transportation and perhaps 1366-5545/$ - see front matter Ó 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.tre.2011.08.006 ⇑ Corresponding author. Tel.: +1 4045147959; fax: +1 4048942301. E-mail addresses: cwhite@isye.gatech.edu (C.C. White III), tcheong3@isye.gatech.edu (T. Cheong). 1 For example, the United States imports and exports annually about US$ 40 billion of perishable food, such as produce and fresh meat and fish (Coyle et al., 2001; Foreign Agricultural Trade of the United States (FATUS), 2008). In 2007, the pharmaceutical market was estimated to be a US$ 712 billion market worldwide (German Association of Research-based Pharmaceutical Companies (GARPC), 2008) and many important pharmaceuticals are perishable, e.g., vaccines. 2 According to a study by the United Nations Environment Program (UNEP), ‘‘over half of the food produced globally is lost, wasted or discarded as a result of inefficiency in the human-managed food chain’’ (Environment News Service, 2009). The percentage of perishable food that perishes during storage and transit in the US is approximately 10–15% of perishable freight tonnage and 25–50% of total economic value due to the degraded quality of goods (Lundquvist et al., 2008). A recent study by the University of Florida Food Distribution and Retailing Resource Center (http://cfdr.ifas.ufl.edu/) showed that one-third of shipped food production is wasted annually (equivalent to a US$ 35 billion loss each year), and half of the loss is mainly due to temperature control problems in a shipment between the grower and the retailer (Intelleflex, 2010). Further, approximately 25% of all vaccine products worldwide degrade before reaching their destination (World Health Organization, 2003; World Health Organization, 2006). These percentages can be substantially higher in countries with a less well- developed cold supply chain infrastructure (e.g., China, Bolton and Liu, 2006 ). According to the United Kingdom’s Medicines and Healthcare Products Regulatory Agency (MHRA), as much as 43% of major deficiencies in pharmaceutical cold chain shipping and distribution are related to poor control and monitoring of storage and transportation temperature (Lucas et al., 2004). Transportation Research Part E 48 (2012) 310–330 Contents lists available at SciVerse ScienceDirect Transportation Research Part E journal homepage: www.elsevier.com/locate/tre