Impact of coordination on costs and carbon emissions for a two-echelon serial economic order quantity problem

Abstract

Coordination in supply chains consists in aligning the decisions made by several echelons to reach a globally optimal solution called the centralized solution, and to share the benefits among the actors. This concept has been studied widely from a cost optimization perspective but coordination is also proposed by practitioners and academics as a solution to reduce carbon emissions. This article compares the costs and carbon emissions resulting from a non-coordinated two-echelon serial economic order quantity model to that of the centralized solution. Our model accounts for transportation and inventory related costs and emissions and we consider vehicle capacities. We derive new results to solve the problem in the non-coordinated and in the centralized cases. We provide sufficient conditions ensuring that coordination enables reducing both costs and emissions and we show that these conditions are satisfied in many applications. On the other hand, we also identify situations for which coordination leads to an increase in emissions and we provide sufficient conditions. In such situations, we additionally show how to obtain a solution decreasing both costs and carbon emissions. We use multiobjective optimization to identify all these solutions and we provide a series of insights.