IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v11y2018i11p3013-d179992.html
   My bibliography  Save this article

Diverse Schemes of Cost Pooling for Carbon-Reduction Outsourcing in Low-Carbon Supply Chains

Author

Listed:
  • Qinpeng Wang

    (School of Management Science and Engineering, Hebei University of Economics and Business, Shijiazhuang 050061, China)

  • Longfei He

    (College of Management and Economics, Tianjin University, Tianjin 300072, China)

  • Daozhi Zhao

    (College of Management and Economics, Tianjin University, Tianjin 300072, China)

  • Michele Lundy

    (Portsmouth Business School, Portsmouth University, Portsmouth PO1 2UP, UK)

Abstract

Among responses to governmental regulations for curbing carbon emissions, outsourcing carbon reduction to a specialized third-party is an important means to satisfy a variety of carbon-emission restraints. In this situation, however, designing efficient contracts for emission reducing while retaining appropriate supply-chain profit is a substantial but challenging problem. We therefore refine this from practice and consider a low-carbon supply chain consisting of one manufacturer and one retailer to analyze in which conditions the system should outsource its carbon reduction efforts to an external expert firm under the assumption that consumers with a sense of social responsibility prefer low carbon products. In the decarbonization expert firm embedded supply chain, we examine the respective impacts of three cost-pooling schemes for emission reduction on supply chain performances. We find that the manufacturer-undertaking contract is the worst in terms of profit and carbon reduction level among the contracts being studied, while the retailer-undertaking contract yields the best outcome in terms of the profit and performs well in carbon reduction when the contractor has cost efficiency in carbon reduction, which is even better than the joint-undertaking contract in carbon reduction when the contractor is inefficient. The study shows the diversity of contracts on outsourcing carbon reduction significantly impacts the supply chain profitability, carbon reduction efficiency and sustainability of operations.

Suggested Citation

  • Qinpeng Wang & Longfei He & Daozhi Zhao & Michele Lundy, 2018. "Diverse Schemes of Cost Pooling for Carbon-Reduction Outsourcing in Low-Carbon Supply Chains," Energies, MDPI, vol. 11(11), pages 1-17, November.
  • Handle: RePEc:gam:jeners:v:11:y:2018:i:11:p:3013-:d:179992
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/11/11/3013/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/1996-1073/11/11/3013/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-937, July.
    2. Hua, Guowei & Cheng, T.C.E. & Wang, Shouyang, 2011. "Managing carbon footprints in inventory management," International Journal of Production Economics, Elsevier, vol. 132(2), pages 178-185, August.
    3. Liu, Zugang (Leo) & Anderson, Trisha D. & Cruz, Jose M., 2012. "Consumer environmental awareness and competition in two-stage supply chains," European Journal of Operational Research, Elsevier, vol. 218(3), pages 602-613.
    4. Lukas, Elmar & Welling, Andreas, 2014. "Timing and eco(nomic) efficiency of climate-friendly investments in supply chains," European Journal of Operational Research, Elsevier, vol. 233(2), pages 448-457.
    5. Felipe Caro & Charles J. Corbett & Tarkan Tan & Rob Zuidwijk, 2013. "Double Counting in Supply Chain Carbon Footprinting," Manufacturing & Service Operations Management, INFORMS, vol. 15(4), pages 545-558, October.
    6. Joseph E. Aldy & Matthew J. Kotchen & Anthony A. Leiserowitz, 2012. "Willingness to pay and political support for a US national clean energy standard," Nature Climate Change, Nature, vol. 2(8), pages 596-599, August.
    7. Liu, Zugang & Nagurney, Anna, 2011. "Supply chain outsourcing under exchange rate risk and competition," Omega, Elsevier, vol. 39(5), pages 539-549, October.
    8. Cruz, Jose M. & Wakolbinger, Tina, 2008. "Multiperiod effects of corporate social responsibility on supply chain networks, transaction costs, emissions, and risk," International Journal of Production Economics, Elsevier, vol. 116(1), pages 61-74, November.
    9. Kragt, M.E. & Gibson, F.L. & Maseyk, F. & Wilson, K.A., 2016. "Public willingness to pay for carbon farming and its co-benefits," Ecological Economics, Elsevier, vol. 126(C), pages 125-131.
    10. Gérard P. Cachon, 2014. "Retail Store Density and the Cost of Greenhouse Gas Emissions," Management Science, INFORMS, vol. 60(8), pages 1907-1925, August.
    11. Xiao, Tiaojun & Qi, Xiangtong, 2008. "Price competition, cost and demand disruptions and coordination of a supply chain with one manufacturer and two competing retailers," Omega, Elsevier, vol. 36(5), pages 741-753, October.
    12. Angappa Gunasekaran & Zahir Irani & Thanos Papadopoulos, 2014. "Modelling and analysis of sustainable operations management: certain investigations for research and applications," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 65(6), pages 806-823, June.
    13. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    14. Aldy, Joseph Edgar & Leiserowitz, Anthony A & Kotchen, Matthew J, 2012. "Willingness to Pay and Political Support for a U.S. National Clean Energy Standard," Scholarly Articles 8832942, Harvard Kennedy School of Government.
    15. Yu, Haisheng & Zeng, Amy Z. & Zhao, Lindu, 2009. "Single or dual sourcing: decision-making in the presence of supply chain disruption risks," Omega, Elsevier, vol. 37(4), pages 788-800, August.
    16. Shaofu Du & Jiaang Zhu & Huifang Jiao & Wuyi Ye, 2015. "Game-theoretical analysis for supply chain with consumer preference to low carbon," International Journal of Production Research, Taylor & Francis Journals, vol. 53(12), pages 3753-3768, June.
    17. Kaya, Onur, 2011. "Outsourcing vs. in-house production: a comparison of supply chain contracts with effort dependent demand," Omega, Elsevier, vol. 39(2), pages 168-178, April.
    18. Sameer Hasija & Edieal J. Pinker & Robert A. Shumsky, 2008. "Call Center Outsourcing Contracts Under Information Asymmetry," Management Science, INFORMS, vol. 54(4), pages 793-807, April.
    19. Yang, Lei & Zhang, Qin & Ji, Jingna, 2017. "Pricing and carbon emission reduction decisions in supply chains with vertical and horizontal cooperation," International Journal of Production Economics, Elsevier, vol. 191(C), pages 286-297.
    20. Xu, Xiaoping & Zhang, Wei & He, Ping & Xu, Xiaoyan, 2017. "Production and pricing problems in make-to-order supply chain with cap-and-trade regulation," Omega, Elsevier, vol. 66(PB), pages 248-257.
    21. Ciwei Dong & Bin Shen & Pui-Sze Chow & Liu Yang & Chi To Ng, 2016. "Sustainability investment under cap-and-trade regulation," Annals of Operations Research, Springer, vol. 240(2), pages 509-531, May.
    22. Du, Shaofu & Zhu, Lili & Liang, Liang & Ma, Fang, 2013. "Emission-dependent supply chain and environment-policy-making in the ‘cap-and-trade’ system," Energy Policy, Elsevier, vol. 57(C), pages 61-67.
    23. R. Canan Savaskan & Luk N. Van Wassenhove, 2006. "Reverse Channel Design: The Case of Competing Retailers," Management Science, INFORMS, vol. 52(1), pages 1-14, January.
    24. Chaabane, A. & Ramudhin, A. & Paquet, M., 2012. "Design of sustainable supply chains under the emission trading scheme," International Journal of Production Economics, Elsevier, vol. 135(1), pages 37-49.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abdessalem Jerbi & Haifa Jribi & Awad M. Aljuaid & Wafik Hachicha & Faouzi Masmoudi, 2022. "Design of Supply Chain Transportation Pooling Strategy for Reducing CO 2 Emissions Using a Simulation-Based Methodology: A Case Study," Sustainability, MDPI, vol. 14(4), pages 1-21, February.
    2. Tian Zhao & Zhixin Liu, 2023. "Investment Timing Analysis of Hydrogen-Refueling Stations and the Case of China: Independent or Co-Operative Investment?," Energies, MDPI, vol. 16(13), pages 1-17, June.
    3. Yanhong Yuan & Yaru Zhang & Lei Wang & Li Wang, 2022. "Coping Decisions of Production Enterprises under Low-Carbon Economy," Sustainability, MDPI, vol. 14(15), pages 1-21, August.
    4. Haider Mahmood & Abdullatif Sulaiman Alrasheed & Maham Furqan, 2018. "Financial Market Development and Pollution Nexus in Saudi Arabia: Asymmetrical Analysis," Energies, MDPI, vol. 11(12), pages 1-15, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhitao Xu & Adel Elomri & Shaligram Pokharel & Fatih Mutlu, 2019. "The Design of Green Supply Chains under Carbon Policies: A Literature Review of Quantitative Models," Sustainability, MDPI, vol. 11(11), pages 1-20, May.
    2. Shoufeng Ji & Dan Zhao & Xiaoshuai Peng, 2018. "Joint Decisions on Emission Reduction and Inventory Replenishment with Overconfidence and Low-Carbon Preference," Sustainability, MDPI, vol. 10(4), pages 1-21, April.
    3. Meng, Xiaoge & Yao, Zhong & Nie, Jiajia & Zhao, Yingxue & Li, Zenglu, 2018. "Low-carbon product selection with carbon tax and competition: Effects of the power structure," International Journal of Production Economics, Elsevier, vol. 200(C), pages 224-230.
    4. Qiang Du & Jiajie Zhou, 2022. "Evolution of Low Carbon Supply Chain Research: A Systematic Bibliometric Analysis," IJERPH, MDPI, vol. 19(23), pages 1-20, November.
    5. Zhou, Xiaoyang & Wei, Xiaoya & Lin, Jun & Tian, Xin & Lev, Benjamin & Wang, Shouyang, 2021. "Supply chain management under carbon taxes: A review and bibliometric analysis," Omega, Elsevier, vol. 98(C).
    6. Liangjie Xia & Tingting Guo & Juanjuan Qin & Xiaohang Yue & Ning Zhu, 2018. "Carbon emission reduction and pricing policies of a supply chain considering reciprocal preferences in cap-and-trade system," Annals of Operations Research, Springer, vol. 268(1), pages 149-175, September.
    7. Jinpyo Lee & Mi Lim Lee & Minjae Park, 2018. "A Newsboy Model with Quick Response under Sustainable Carbon Cap-N-Trade," Sustainability, MDPI, vol. 10(5), pages 1-17, May.
    8. Hui Li & Chuanxu Wang & Meng Shang & Wei Ou, 2017. "Pricing, Carbon Emission Reduction, Low-Carbon Promotion and Returning Decision in a Closed-Loop Supply Chain under Vertical and Horizontal Cooperation," IJERPH, MDPI, vol. 14(11), pages 1-26, November.
    9. Xu, Song & Fang, Lei, 2020. "Partial credit guarantee and trade credit in an emission-dependent supply chain with capital constraint," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 135(C).
    10. Yang, Lei & Hu, Yijuan & Huang, Lijuan, 2020. "Collecting mode selection in a remanufacturing supply chain under cap-and-trade regulation," European Journal of Operational Research, Elsevier, vol. 287(2), pages 480-496.
    11. Susu Cheng & Fan Zhang, 2022. "Regulatory pressure and consumer environmental awareness in a green supply chain with retailer responsibility: A dynamic analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(4), pages 1133-1151, June.
    12. Sim, Jeongeun & Kim, Bowon, 2021. "Regulatory versus consumer pressure and retailer responsibility for upstream pollution in a supply chain," Omega, Elsevier, vol. 101(C).
    13. Xiaoyan Wang & Minggao Xue & Lu Xing, 2018. "Analysis of Carbon Emission Reduction in a Dual-Channel Supply Chain with Cap-And-Trade Regulation and Low-Carbon Preference," Sustainability, MDPI, vol. 10(3), pages 1-18, February.
    14. Jaehyung An & Jinho Lee, 2018. "A Newsvendor Non-Cooperative Game for Efficient Allocation of Carbon Emissions," Sustainability, MDPI, vol. 10(1), pages 1-14, January.
    15. Wang, Yuyan & Yu, Zhaoqing & Jin, Mingzhou & Mao, Jiafu, 2021. "Decisions and coordination of retailer-led low-carbon supply chain under altruistic preference," European Journal of Operational Research, Elsevier, vol. 293(3), pages 910-925.
    16. Yuyu Chen & Bangyi Li & Qingguo Bai & Zhi Liu, 2018. "Decision-Making and Environmental Implications under Cap-and-Trade and Take-Back Regulations," IJERPH, MDPI, vol. 15(4), pages 1-25, April.
    17. Xuyue Li, 2018. "Competing Retailers’ Environmental Investment: An Analysis under Different Power Structures," Energies, MDPI, vol. 11(10), pages 1-18, October.
    18. Xu, Xiaoping & He, Ping & Xu, Hao & Zhang, Quanpeng, 2017. "Supply chain coordination with green technology under cap-and-trade regulation," International Journal of Production Economics, Elsevier, vol. 183(PB), pages 433-442.
    19. Cao, Erbao & Yu, Man, 2019. "The bright side of carbon emission permits on supply chain financing and performance," Omega, Elsevier, vol. 88(C), pages 24-39.
    20. Lei Yang & Meng Chen & Yiji Cai & Sang-Bing Tsai, 2018. "Manufacturer’s Decision as Consumers’ Low-Carbon Preference Grows," Sustainability, MDPI, vol. 10(4), pages 1-26, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:11:y:2018:i:11:p:3013-:d:179992. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.