Environmentally sustainable stochastic procurement model

Abstract

PurposeProcurement planning has always been a huge and challenging activity for business firms, especially in manufacturing. With government legislations about global concern over carbon emissions, the manufacturing firms are enforced to regulate and reduce the emissions caused throughout the supply chain. It is observed that procurement and logistics activities in manufacturing firms contribute heavily toward carbon emissions. Moreover, highly dynamic and uncertain business environment with uncertainty in parameters such as demand, supplier and carrier capacity adds to the complexity in procurement planning. The paper aims to discuss these issues.Design/methodology/approachThis paper is a novel attempt to model environmentally sustainable stochastic procurement (ESSP) problem as a mixed-integer non-linear program. The ESSP optimizes the procurement plan of the firm including lot-sizing, supplier and carrier selection by addressing uncertainty and environmental sustainability. The model applies chance-constrained-based approach to address the uncertain parameters.FindingsThe proposed ESSP model is solved optimally for 30 data sets to validate the proposed ESSP and is further demonstrated using three illustrations solved optimally in LINGO 10.Originality/valueThe ESSP model simultaneously minimizes total procurement cost and carbon emissions over the entire planning horizon considering uncertain demand, supplier and carrier capacity.