Green supply chain performance with cost learning and operational inefficiency effects

Abstract

Environmental issues are receiving significant attention from the public, accelerating the development of green supply chain in operations management. This study focuses on the green supply chain performance in a single manufacturer-retailer setup, in which the manufacturer determines energy efficiency level and wholesale price, while the retailer decides on sales price. The unit production cost is jointly affected by cost learning and operational inefficiency effects. Open-loop, feedback and myopic equilibria are subsequently derived, and the corresponding supply chain performance and profit distribution are analyzed. The main results show that forward-looking behavior is preferred to myopic one for channel members. Feedback equilibrium is beneficial to the manufacturer, but is harmful to the retailer. The supply chain efficiencies in forward-looking and myopic situations are lower than the static supply chain efficiency, which results from cost learning and operational inefficiency effects, as well as non-price variable. The manufacturer and the retailer extract more profits under certain conditions, i.e., high cost learning effect, large energy efficiency effectiveness, low operational inefficiency effect or discount rate. However, the corresponding supply chain efficiencies decrease, and the manufacturer's profit proportions are less than 2/3. Investigation of supply chain performance with competition from multiple retailers implies that the effects of system parameters on supply chain performance keep the same directions of single manufacturer-retailer setup, while competition improves supply chain efficiency and manufacturer's profit proportion. This work contributes in involving cost learning and operational inefficiency effects simultaneously in a dynamic environment to explore supply chain performance.