Food waste has long been treated as an unavoidable by-product of modern commerce: products are manufactured, transported, displayed and sold, and whatever remains unsold after its expiration date is usually discarded. A new study published in Clean Technologies and Environmental Policy proposes a different path. Instead of sending expired goods to landfill or paying for their disposal, manufacturers could buy them back from distributors and transform them into new, higher-value products. In a case study focused on dairy products, the researchers describe how expired milk and related goods could be redirected into fertilizer production, creating a circular supply chain designed to recover both economic and environmental value.
The framework, developed by Yongrui Duan, Maryam Khokhar, Ali Raza, Anshuman Sharma, Tahir Islam and colleagues, addresses a problem that becomes especially severe when demand is uncertain. Distributors must decide how much inventory to order without knowing exactly how much consumers will buy. Ordering too little can produce shortages and lost sales, while ordering too much increases the likelihood that products will expire before they reach customers. Traditional supply-chain models generally treat the movement of goods as a one-way process from manufacturer to distributor and then to consumer. The proposed system adds a reverse flow in which unsold or expired products return to the manufacturer for recovery.
At the center of the model is a two-tier supply chain consisting of manufacturers and distributors. Under the proposed product buyback agreement, the manufacturer accepts expired products from the distributor at an agreed price. The returned goods are then processed into secondary outputs, such as fertilizer or energy. This arrangement changes the economic consequences of overstocking. In a conventional system, the distributor bears disposal costs and may receive no value from expired inventory. In the circular model, the distributor obtains compensation through the buyback agreement, while the manufacturer gains access to material that can be processed and sold or used as an industrial input. The contract therefore links waste reduction with financial coordination between supply-chain partners.
The researchers represent demand during a replenishment cycle as a normally distributed random variable. If the cycle lasts for a period (T), demand has a mean of (\mu T) and a standard deviation of (\sigma\sqrt{T}), where (\mu) describes the average demand rate and (\sigma) represents demand variability. The order quantity is expressed as (Q=\mu T+k\sigma\sqrt{T}). Here, (k) is a safety factor determined by the desired service level: a higher (k) means the distributor holds more inventory to reduce the probability of a stockout. This equation allows the model to connect inventory decisions with uncertainty, customer service targets and the probability that products will remain unsold.
The mathematical structure also estimates two opposing outcomes. Expected shortage is written as (E[(X-Q)^+]=\sigma\sqrt{T}G(k)), where (X) is realized demand and (G(k)) is the standard loss function associated with the normal distribution. This term measures demand that exceeds available inventory. Expected leftover inventory is expressed as (E[(Q-X)^+]=\sigma\sqrt{T}[G(k)+k]), representing products remaining when demand falls below the order quantity. Together, these calculations allow the researchers to evaluate the cost of holding excess products, the cost of shortages, the expense of disposing of expired goods and the revenue generated from sales or recovered materials.
The model then combines these inventory outcomes into profit-maximization problems for both members of the supply chain and for the system as a whole. The distributor’s profit includes the wholesale price paid to the manufacturer, the retail revenue earned from selling products, holding costs, disposal costs and a penalty associated with lost sales. The manufacturer’s decision includes production costs, buyback payments and the value obtained from recycling returned products. The researchers show that the distributor’s profit function is concave with respect to the safety factor (k). In practical terms, this means the model has a stable interior optimum under the stated assumptions: increasing safety stock initially can protect against shortages, but beyond a certain point the additional holding and disposal risks outweigh the benefits.
Product buyback agreements are important because the interests of manufacturers and distributors do not naturally align. A distributor may prefer to order conservatively to avoid being left with expired goods, while a manufacturer may favor larger orders because they increase production and wholesale sales. Without coordination, the supply chain can produce too much inventory, too much waste or too many shortages. A buyback contract redistributes risk by giving the distributor partial protection against unsold stock. At the same time, the manufacturer receives a predictable stream of recoverable material and can capture value through reprocessing. The agreement effectively converts a disposal liability into a shared circular-economy opportunity.
The dairy-industry case study illustrates how this mechanism could work in a sector where expiration dates are particularly consequential. Dairy products are perishable, and once they can no longer be sold as food, they may still contain organic matter and nutrients suitable for industrial processing. The proposed pathway sends expired dairy products back through the supply chain, where they can be converted into fertilizer. This does not mean that expired food is returned to consumers or reintroduced into the food market. Instead, it is diverted into a separate recovery process subject to appropriate safety, quality and regulatory controls. The resulting fertilizer represents a secondary product created from material that would otherwise generate disposal costs and environmental burdens.
According to the study’s analysis, introducing buyback agreements can reduce total supply-chain costs by approximately 15 to 25 percent, although the exact result depends on product category, demand conditions, prices and processing economics. The authors also suggest that recycling expired products could generate annual savings worth millions of dollars when applied at scale. These estimates should be interpreted as model-based projections rather than universal guarantees, particularly because the study reports that no new dataset was generated or analyzed. Real-world performance would depend on collection logistics, contamination rates, transportation distances, processing capacity, energy use and the market value of recovered products. A circular system can reduce waste, but it must still be designed to ensure that recovery does not create larger hidden environmental costs.
The study’s broader message is that zero-waste supply chains will require more than recycling technology alone. They will depend on contracts, information sharing and coordinated decisions across companies that traditionally treat waste as someone else’s problem. By combining uncertain-demand inventory mathematics with reverse logistics and product repurchase agreements, the framework offers a way to make expired products visible within supply-chain planning rather than leaving them at the end of the process. If manufacturers and distributors can share both the risks and rewards of recovery, products that once marked the failure of a linear system could become feedstocks for new industries. The proposal places expired dairy goods at the center of a larger transformation: from disposable inventory to a managed resource circulating through the economy.
Subject of Research: Circular supply chains, expired-product recovery, inventory coordination and zero-waste management in the dairy industry
Article Title: A collaborative framework for zero waste and circular supply chains solution in the circular economy
Article References: Duan, Y., Khokhar, M., Raza, A. et al. “A collaborative framework for zero waste and circular supply chains solution in the circular economy.” Clean Technologies and Environmental Policy 28, 236 (2026).
Image Credits: AI Generated
DOI: https://doi.org/10.1007/s10098-026-03581-x
Keywords: Zero waste; circular supply chains; expired-product reprocessing; supply-chain management; product repurchase agreements; circular economy; dairy waste; reverse logistics; inventory uncertainty; fertilizer production
