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

Author

Listed:
  • 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])

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.

Suggested Citation

  • Qingguo Bai & Yeming Gong & Mingzhou Jin & Xianhao Xu, 2019. "Effects of carbon emission reduction on supply chain coordination with vendor-managed deteriorating product inventory," Post-Print hal-02312264, HAL.
  • Handle: RePEc:hal:journl:hal-02312264
    DOI: 10.1016/j.ijpe.2018.11.008
    as

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