Supply Chain Coordination in the Context of Green Marketing Efforts and Capacity Expansion

Shan Chang, Bin Hu and Xiuhong He
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Shan Chang: School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
Bin Hu: School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
Xiuhong He: School of Management, Wuhan Textile University, Wuhan 430200, China

Sustainability, 2019, vol. 11, issue 20, 1-22

Abstract: This paper focuses on coordination issues related to the green supply chain with capacity constraints and green marketing efforts. We build a two-stage green supply chain, in which the upstream manufacturer has a certain amount of installed capacity to produce green product, yet can expand its capacity through a Cloud Manufacturing (CM) Platform once its existing capacity becomes insufficient, while the downstream retailer expends green marketing effort to promote the green product. In particular, we analyze the interaction between the capacity expansion options of the manufacturer and the green marketing efforts of the retailer. Aiming to mitigate the inefficiency under a decentralized green supply chain, we design a contract that combines cost-sharing and revenue-sharing in green marketing in order to coordinate the supply chain. The results show that: (1) when the manufacturer’s existing capacity falls below a certain threshold, it will choose to expand its capacity. The threshold is related to existing capacity, capacity expansion cost coefficient, green marketing cost coefficient, and sensitivity coefficient of demand to green marketing. (2) Under low capacity, if the capacity expansion cost coefficient is large, a higher consumer environmental awareness or preference for green products will weaken the retailer’s motivation for expending green effort. (3) A contract for cost-sharing and revenue-sharing in green marketing can fully coordinate the green supply chain, whereby the two share proportions are equal and meet certain constraints.

Keywords: Green supply chain; green marketing; capacity expansion; Cloud Manufacturing; supply chain coordination (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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