Trade in perishable products is complex as evidenced by the large literature in operations research on managing perishable products inventories and distribution (Mirabell and Solina , 2022). Despite its complexity trade in perishables, including seafood, has grown over time (Asche, Straume and Vårdal, 2021).
This paper investigates trade in fresh seafood when there is economics of scale in order sizes. Suppliers often reduce the unit purchasing price for large orders due to cost savings. For perishable products larger order sizes lead to lower average product quality in the destination market. All else equal, a larger order is consumed over a longer period, which then reduces its average quality. This leads to inefficiency when there are economics of scale on order sizes. Trade in perishables benefit from larger buyers or access to larger markets , allowing utilization of economics of scale without sacrificing product quality.
We leverage customs data on Norwegian seafood exports and document that
We further explore the implications of perishability and economics of scale in trade by developing a trade model that includes decisions over both order size and order frequency. The model shows how perishability leads to higher prices, lower order sizes to maintain quality, lower sales and trade profit. At the aggregate level perishable products excludes small buyers. We use customs data to test model predictions and quantify the impact of perishability on Norwegian seafood exports.
Asche, F., Straume, H.M. and Vårdal, E., 2021. Perish or prosper : Trade patterns for highly perishable seafood products. Agribusiness, 37(4), pp.876-890.
Mirabelli , G. and Solina , V., 2022. Optimization strategies for the integrated management of perishable supply chains : A literature review. Journal of Industrial Engineering and Management (JIEM), 15(1), pp.58-91.