Effects of carbon emission reduction on supply chain coordination with vendor-managed deteriorating product inventory

Qingguo Bai, Yeming Gong (), Mingzhou Jin and Xianhao Xu
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Qingguo Bai: Qufu Normal University
Yeming Gong: EM - EMLyon Business School
Mingzhou Jin: CSUFT - Central South University of Forestry and Technology, The University of Tennessee [Knoxville]
Xianhao Xu: HUST - Huazhong University of Science and Technology [Wuhan]

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Abstract: While many supply chains use vendor-managed inventory (VMI) to handle deteriorating products, they employ special facilities (e.g., cold warehouses), which produce significant carbon emissions. This new operational practice motivates us to investigate the effects of carbon emission reduction on a supply chain with one manufacturer and two competing retailers for deteriorating products under VMI, which has not been fully studied in the existing literature. Carbon cap-and-trade regulation and investment in green technologies are used to curb carbon emissions generated by production and inventory holding in this system. To bench mark the performance of the decentralized system, an optimization model for the centralized system is formulated to show that there exists an upper bound on the profit penalty for decentralization and the carbon emissions of the centralized system may be lower than those of the decentralized system. A revenue-sharing contract is then proposed to improve the profit and emissions of the decentralized system. The results show that the supply chain can be coordinated perfectly when the demand depends on the manufacturer's green technology level and two competing retailers' selling prices. Numerical examples with sensitivity analysis are further provided to test the robustness of the supply chain's operational decisions.

Keywords: Supply chain management; Carbon emissions; Green technology; Deteriorating product; VMI (search for similar items in EconPapers)
Date: 2019-02-01
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Citations: View citations in EconPapers (35)

Published in International Journal of Production Economics, 2019, 208, 83-99 p. ⟨10.1016/j.ijpe.2018.11.008⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02312264

DOI: 10.1016/j.ijpe.2018.11.008

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