Food waste recycling closed loop supply chain optimization through renting waste recycling facilities

Optimization techniques in reverse logistics and closed-loop supply chains (CLSC) may effectively address food waste problem in urban areas. Motivated by recent advances in collecting/recycling food wastes through recycling supply chains, this study contributes to optimizing such a recycling channel in urban areas. We examine if renting waste-recycling facilities by a food trading company located in urban areas, where production/recycling processes are prohibited, is able to mitigate the problem. This paper examines a three-tier CLSC, including a trading company located in urban areas, a production plant located in peri-urban zones, and a food-waste-collector, in which food-waste is collected from restaurants/chain-stores for recycling purposes. The trading company rents waste-recycling facilities from the production plant in the peri-urban zones to carry out the relevant processes. To coordinate the channel, a novel Quantity Flexibility (QF) contract is developed. Results, based on a real case study in the meat products supply chain, show that profitability of the supply chain is increased using the proposed QF contract significantly (e.g., 30 percent increase in the food-waste-collector's expected profit). The findings from our developed models can help food supply chain managers to find cost-effective solutions for cooperating with other supply chain members. Our results show a Pareto-improvement outcome.