Sustainability in Material Purchasing: A Multi-Objective Economic Order Quantity Model under Carbon Trading

Daria Battini, Martina Calzavara, Ilaria Isolan, Fabio Sgarbossa and Francesco Zangaro
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Daria Battini: Department of Management and Engineering, University of Padova, 36100 Vicenza VI, Italy
Martina Calzavara: Department of Management and Engineering, University of Padova, 36100 Vicenza VI, Italy
Ilaria Isolan: Department of Management and Engineering, University of Padova, 36100 Vicenza VI, Italy
Fabio Sgarbossa: Department of Management and Engineering, University of Padova, 36100 Vicenza VI, Italy
Francesco Zangaro: Department of Management and Engineering, University of Padova, 36100 Vicenza VI, Italy

Sustainability, 2018, vol. 10, issue 12, 1-15

Abstract: Sustainability in material purchasing is a growing area of research. Goods purchasing decisions strongly affect transportation path flows, vehicle consolidation, inventory levels, and related obsolescence costs. These choices have an economic impact on the supply chain, in terms of different logistic costs, and an environmental impact, in terms of the carbon emissions produced during goods transportation, storage and final recovery. In this paper, we initially analyze and compare the environmental economic policies established by the International Governments in relation to the carbon trading systems adopted. Then, we overcome a traditional single objective formulation, by developing a bi-objective lot-sizing model in which costs and emissions are kept separated and analyzed by using a Pareto frontier subject to a Cap and Trade mitigation policy. The model is useful in practice to support managers in understanding the Pareto frontier shape linked to a specific purchasing problem, defining the cost-optimal and emission-optimal solutions and identifying a sustainable quantity to purchase when a Cap and Trade mitigation policy is present. We further analyze the model behavior according to variation in market carbon price and we finally analytically demonstrate that today carbon prices are still far too low to motivate managers towards sustainable purchasing choices: there is still a gap of about 79%.

Keywords: multi-objective approach; sustainable purchasing; lot sizing; Cap and Trade; Economic Order Quantity; carbon price (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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