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Managing carbon footprints in inventory management

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  • Hua, Guowei
  • Cheng, T.C.E.
  • Wang, Shouyang

Abstract

There is a broad consensus that mankind must reduce carbon emissions to mitigate global warming. It is generally accepted that carbon emission trading is one of the most effective market-based mechanisms to curb the amount of carbon emissions. This paper investigates how firms manage carbon footprints in inventory management under the carbon emission trading mechanism. We derive the optimal order quantity, and analytically and numerically examine the impacts of carbon trade, carbon price, and carbon cap on order decisions, carbon emissions, and total cost. We make interesting observations from the numerical examples and provide managerial insights from the analytical results.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:proeco:v:132:y:2011:i:2:p:178-185
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    References listed on IDEAS

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    1. Harris, Irina & Naim, Mohamed & Palmer, Andrew & Potter, Andrew & Mumford, Christine, 2011. "Assessing the impact of cost optimization based on infrastructure modelling on CO2 emissions," International Journal of Production Economics, Elsevier, vol. 131(1), pages 313-321, May.
    2. Sundarakani, Balan & de Souza, Robert & Goh, Mark & Wagner, Stephan M. & Manikandan, Sushmera, 2010. "Modeling carbon footprints across the supply chain," International Journal of Production Economics, Elsevier, vol. 128(1), pages 43-50, November.
    3. Penkuhn, T. & Spengler, Th. & Puchert, H. & Rentz, O., 1997. "Environmental integrated production planning for the ammonia synthesis," European Journal of Operational Research, Elsevier, vol. 97(2), pages 327-336, March.
    4. Letmathe, Peter & Balakrishnan, Nagraj, 2005. "Environmental considerations on the optimal product mix," European Journal of Operational Research, Elsevier, vol. 167(2), pages 398-412, December.
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